The Commission's Whistleblower Program Rules, 9280-9297 [2022-03223]

Agencies

• SECURITIES AND EXCHANGE COMMISSION

[Federal Register Volume 87, Number 34 (Friday, February 18, 2022)]
[Proposed Rules]
[Pages 9280-9297]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-03223]


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SECURITIES AND EXCHANGE COMMISSION

17 CFR Part 240

[Release No. 34-94212; File No. S7-07-22]
RIN 3235-AN03


The Commission's Whistleblower Program Rules

AGENCY: Securities and Exchange Commission.

ACTION: Proposed rule.

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SUMMARY: The Securities and Exchange Commission (``Commission'' or 
``SEC'') is proposing for public comment amendments to the Commission's 
rules implementing its whistleblower program. The Securities Exchange 
Act

[[Page 9281]]

of 1934 (``Exchange Act'') provides for, among other things, the 
issuance of monetary awards to any eligible whistleblower who 
voluntarily provides the SEC with original information about a 
securities law violation that leads to the SEC's success in obtaining a 
monetary order of more than a million dollars in a covered judicial or 
administrative action brought by the SEC (``covered action''). If an 
eligible whistleblower qualifies for an award, Section 21F requires an 
award that is at least 10 percent, but no more than 30 percent, of the 
amount of the monetary sanctions collected in the covered action. The 
receipt of an award in a covered action also enables a whistleblower to 
qualify for an award in connection with judicial or administrative 
actions based on the whistleblower's same original information and 
brought by the U.S. Department of Justice (``DOJ'') and certain other 
statutorily identified agencies or entities (``related actions''). The 
proposed rules would make two substantive changes to the Commission's 
whistleblower rules that implement the whistleblower program, as well 
as several conforming amendments and technical corrections.

DATES: Comments should be received on or before April 11, 2022.

ADDRESSES: Comments may be submitted by any of the following methods:

Electronic Comments

     Use the Commission's internet comment form (https://www.sec.gov/rules/submitcomments.htm); or
     Send an email to [email protected]. Please include 
File Number S7-07-22 on the subject line; or

Paper Comments

     Send paper comments to, Secretary, Securities and Exchange 
Commission, 100 F Street NE, Washington, DC 20549-1090.

All submissions should refer to File Number S7-07-22. This file number 
should be included on the subject line if email is used. To help us 
process and review your comments more efficiently, please use only one 
method of submission. The Commission will post all comments on the 
Commission's website (https://www.sec/gov/rules/proposed.shtml). 
Typically, comments are also available for website viewing and printing 
in the Commission's Public Reference Room, 100 F Street NE, Washington, 
DC 20549, on official business days between the hours of 10 a.m. and 3 
p.m. Operating conditions may limit access to the Commission's public 
reference room. All comments received will be posted without change. 
Persons submitting comments are cautioned that we do not redact or edit 
personal identifying information from comment submissions. You should 
submit only information that you wish to make available publicly.

FOR FURTHER INFORMATION CONTACT: Emily Pasquinelli, Office of the 
Whistleblower, Division of Enforcement, at (202) 551-5973; Hannah W. 
Riedel, Office of the General Counsel, at (202) 551-7918, Securities 
and Exchange Commission, 100 F Street NE, Washington, DC 20549.

SUPPLEMENTARY INFORMATION: The Commission is proposing to amend the 
rules set forth in the table below.

                               Amendments
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            Commission  reference                CFR citation (17 CFR)
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Rule 21F-3...................................  Sec.   240.21F-3.
Rule 21F-4...................................  Sec.   240.21F-4.
Rule 21F-6...................................  Sec.   240.21F-6.
Rule 21F-8...................................  Sec.   240.21F-8.
Rule 21F-10..................................  Sec.   240.21F-10.
Rule 21F-11..................................  Sec.   240.21F-11.
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Table of Contents

I. Introduction
    A. The Whistleblower Award Program
    B. Overview of the Proposed Rules
II. Discussion of Proposed Rules
    A. Proposed Amendment to Exchange Act Rule 21F-3(b) Defining a 
``Comparable'' Whistleblower Award Program for Related Actions
    1. The Comparability Approach
    2. Whistleblower's Choice Option
    3. Other Alternatives
    B. Proposed Amendment to Exchange Act Rule 21F-6 Regarding Size 
of Award
    C. Proposed Technical Amendments to Rule 21F-4(c) and Rule 21F-
8(e)
III. General Request for Public Comment
IV. Economic Analysis
    A. Economic Baseline
    B. Proposed Rules
    1. Proposed Rule 21F-3(b)(3)
    2. Proposed Rule 21F-6
    C. Additional Alternatives
    D. Effects of the Proposed Rules on Efficiency, Competition, and 
Capital Formation
V. Small Business Regulatory Enforcement Fairness Act
VI. Regulatory Flexibility Act Certification
VII. Statutory Basis

I. Introduction

A. The Whistleblower Award Program

    Section 21F of the Exchange Act, among other things, directs that 
the Commission pay awards, subject to certain limitations and 
conditions, to whistleblowers who voluntarily provide the Commission 
with original information about a violation of the Federal securities 
laws and regulations that leads to the successful enforcement of a 
covered action and certain related actions brought by other statutorily 
identified authorities.\1\ Section 21F provides that an award must be 
at least 10 percent, but no more than 30 percent, of the amount of the 
monetary sanctions collected in the action for which the award is 
granted.\2\ Whistleblower awards are paid from a dedicated Investor 
Protection Fund (``IPF'') created by Congress.\3\
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    \1\ 15 U.S.C. 78u-6(a)(5) (``The term `related action', when 
used with respect to any judicial or administrative action brought 
by the Commission under the securities laws, means any judicial or 
administrative action brought by an entity described in subclauses 
(I) through (IV) of subsection (h)(2)(D)(i) [of the Exchange Act] 
that is based upon the original information provided by a 
whistleblower . . . that led to the successful enforcement of the 
Commission action.'').
    \2\ See 15 U.S.C. 78u-6(b).
    \3\ The IPF, which was established as part of the whistleblower 
program, is a statutorily established fund within the U.S. 
Department of the Treasury from which Commission whistleblower 
awards are paid. See Exchange Act Section 21F(g)(3), 15 U.S.C. 78u-
6. The IPF operates under a continuing appropriation and has a 
statutorily created self-replenishing process. Id.
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    In May 2011, the Commission adopted a comprehensive set of rules to 
implement the whistleblower program.\4\ Those rules, which were 
codified at 17 CFR 240.21F-1 through 240.21F-17, provide the operative 
definitions, requirements, and processes related to the whistleblower 
program. In June 2018, the Commission proposed amendments to the rules 
(``Proposing Release'' or ``2018 Proposal'').\5\ After reviewing the 
numerous public comments that were received in response to the 2018 
Proposal, the Commission adopted various amendments to the 
whistleblower program rules (referred to interchangeably as ``Adopting 
Release,'' ``Final Rule,'' and ``2020 Amendments'') \6\ in September 
2020.\7\
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    \4\ Securities Whistleblower Incentives and Protections, Release 
No. 34-64545, 76 FR 34300 (June 13, 2011). See also Proposed Rules 
for Implementing the Whistleblower Provisions of Section 21F of the 
Securities Exchange Act of 1934, 75 FR 70502 (Nov. 17, 2010).
    \5\ Whistleblower Program Rules, Release No. 34-83557, 83 FR 
34702 (proposed June 28, 2018) (17 CFR 240.21F-1 through 240.21F-
18).
    \6\ Whistleblower Program Rules, Release No. 34-89963, 85 FR 
70898 (Sept. 23, 2020) (17 CFR 240.21F-1 through 17 CFR 240.21F-18).
    \7\ These amendments included a new rule 17 CFR 240.21F-18.
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    Two of the rules amended in September 2020 are the subject of this 
proposing release. The first is 17 CFR 240.21F-3(b)(3) (Rule 21F-
3(b)(3)), which addresses situations in which the SEC's whistleblower 
program and at least one other whistleblower program

[[Page 9282]]

may apply to the same related action. The 2020 Amendments authorized 
the Commission to determine, based on the facts and circumstances of 
the claims and misconduct at issue in the potential related action 
(among other factors), whether the Commission's whistleblower program 
or the alternative whistleblower program has the more ``direct or 
relevant connection to the [non-Commission] action.'' \8\ If the 
Commission determines that the other program has the more direct or 
relevant connection, the Commission will not deem the action a related 
action. Any award to be made on the action must come from the other 
whistleblower program.
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    \8\ See Rule 21F-3(b)(3)(i) through (ii).
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    The second rule that is the subject of this proposing release is 
Rule 21F-6, which concerns the Commission's discretion to apply award 
factors and set award amounts. Before the 2020 Amendments, the rule 
text (with the exception of Rule 21F-6(a)(3)) did not explicitly 
address whether the Commission could consider the potential dollar 
amount of an award when setting awards; rather, the rule text generally 
referred to setting awards as a percentage of the monetary sanctions 
recovered.\9\ The 2020 Amendments added language to Rule 21F-6 stating 
that the Commission has discretion to consider the dollar amount of a 
potential award when making an award determination.\10\
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    \9\ See Proposing Release, 83 FR 34704.
    \10\ See Adopting Release, 85 FR 70910 (``To clarify the 
Commission's discretionary authority, we are modifying Rule 21F-6 to 
state that the Commission may consider the factors, and only the 
factors set forth in in Rule 21F-6, in relation to the facts and 
circumstances of each case in setting the dollar or percentage 
amount of the award. This new language, by expressly referring to 
setting the dollar or percentage amount of the award, makes clear 
that the Commission and the Claims Review Staff (CRS) may, in 
applying the Award Factors specified in Rule 21F-6(a) and (b) and 
setting the Award Amount, consider the potential dollar amount that 
corresponds to the application of any of the factors.'') (internal 
footnotes omitted).
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B. Overview of the Proposed Rules

    The Commission is considering further revising Rule 21F-3(b)(3) and 
Rule 21F-6, as well as making some related conforming modifications to 
Rules 21F-10 and 21F-11 and technical amendments to Rule 21F-4(c) and 
Rule 21F-8(e). These proposed rule changes are being offered for public 
comment to help ensure that eligible, meritorious whistleblowers are 
appropriately rewarded for their efforts and that our rules do not 
inadvertently create disincentives to reporting potential securities-
law violations to the Commission.\11\ The Commission anticipates that 
all of the proposed rule changes, if adopted, would apply to all new 
whistleblower award applications filed after the effective date of the 
amended final rules, as well as all whistleblower award applications 
that are pending and have not been the subject of a final order of the 
Commission by the effective date.
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    \11\ In anticipation of the current proposal, the Commission 
released a statement on August 5, 2021, that identifies procedures 
that are available to whistleblowers with claims pending while the 
current rulemaking is ongoing. Release No. 34-81207 (Aug. 5, 2021), 
available at https://www.sec.gov/rules/policy/2021/34-92565.pdf.
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    1. Allowing awards for related actions where an alternative award 
program could yield an award that is meaningfully lower than the 
Commission's whistleblower program would allow. The Commission is 
proposing to amend Rule 21F-3(b)(3) to revise the scope of potential 
related actions (i.e., the non-Commission actions) that could be 
covered by the SEC's whistleblower program in situations where another 
award program might also apply to that same action. Currently, Rule 
21F-3(b)(3) provides that if another award program might apply to an 
action, then the Commission will deem the action a potential related 
action (and process the application further to determine if an award is 
appropriate) only if the SEC's whistleblower program has the ``more 
direct or relevant connection'' to the action (relative to the other 
program's connection to the action).\12\ Under the proposed amendments 
to Rule 21F-3(b)(3) (see Part II(A)(1) below), if a claimant files a 
related-action award application, and the alternative award program is 
not comparable, either because the statutory award range is more 
limited, or because awards are subject to an award cap (and the non-
Commission action otherwise satisfies the criteria in Rule 21F-
3(b)(1)), the Commission would treat the non-Commission action as a 
related action covered by the SEC's program (assuming the other 
criteria of Rule 21F-3(b) are met) regardless of whether the 
alternative award program has a more direct or relevant connection to 
the action.\13\ The Comparability Approach would also provide, however, 
that the Commission would deem a matter eligible for related-action 
status without regard to which program has the more direct and relevant 
connection to the action, if the maximum award in the related action 
would not exceed $5 million. (As discussed in Part II(A)(1)-(2), the 
Commission is also requesting public comment on several other 
alternative approaches, including an option that would allow a 
meritorious whistleblower to decide whether to receive a related-action 
award from the Commission or the authority administering the other 
award program; the whistleblower would not be required to select which 
program to receive the award from until both programs had determined 
the award amount they would pay.)
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    \12\ Under Rule 21F-3(b)(3) as currently drafted, if the 
Commission fails to find that its program has the more direct or 
relevant connection to the action, then the Commission will deny the 
related-action award claim. The claimant is then left to pursue any 
claim for a whistleblower award with the other award program.
    \13\ See, e.g., 12 U.S.C. 4205(d)(1) (establishing a 
whistleblower award program in connection with the Financial 
Institutions Reform, Recovery, and Enforcement Act of 1989, but 
capping awards at $1.6 million).
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    2. Clarifying the Commission's use of discretion to consider dollar 
amounts when determining awards. The Commission is also proposing for 
public comment a new paragraph (d) to Rule 21F-6, which would affirm 
the Commission's statutory authority to consider the dollar amount of a 
potential award when determining the award amount, but clarifies that 
the Commission may exercise its discretion to use that authority for 
the limited purpose of increasing the award amount and may not use it 
for the purpose of decreasing an award (either when applying the award 
factors under Rule 21F-6(b) or otherwise).
    3. Conforming and technical amendments. In addition to the above 
substantive amendments, the Commission is proposing minor modifications 
to Exchange Act Rules 21F-10 and 21F-11 so that those rules conform to 
the proposed changes discussed above.\14\ Further, the Commission is 
proposing technical revisions to Rule 21F-4(c) and to Rule 21F-8 to 
correct errors in the rule text.
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    \14\ See infra notes 24 and 57.
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II. Discussion of Proposed Amendments

A. Proposed Amendment to Exchange Act Rule 21F-3(b) Defining a 
``Comparable'' Whistleblower Award Program for Related Actions

    Under Exchange Act Section 21F(b), a whistleblower who obtains an 
award based on a Commission covered action also may be eligible for an 
award based on monetary sanctions that are collected in a related 
action. Exchange Act Section 21F(a)(5) and Exchange Act Rule 21F-
3(b)(1) provide that a related action is a judicial or administrative 
action that is:

[[Page 9283]]

    (i) Brought by DOJ, an appropriate regulatory authority (as defined 
in Exchange Act Rule 21F-4(g)), a self-regulatory organization (as 
defined in Exchange Act Rule 21F-4(h)), or a state attorney general in 
a criminal case;
    (ii) Based on the same original information that the whistleblower 
voluntarily provided both to the Commission and to the authority or 
entity that brought the related action; \15\ and
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    \15\ A matter will qualify as a related action even if the 
whistleblower did not provide the original information to the other 
authority or entity if the Commission itself provided the 
whistleblower's original information to the authority or entity. Cf. 
17 CFR 240.21F-7(a)(2) (Rule 21F-7(a)(2)).
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    (iii) Resolved in favor of the authority or entity that brought the 
action, and the whistleblower's information led to the successful 
resolution.\16\
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    \16\ Exchange Act Rule 21F-3(b)(2) provides that essentially the 
same criteria that are used to assess whether a whistleblower should 
receive an award in connection with a Commission covered action will 
be applied to determine whether the whistleblower should also 
receive an award in connection with the potential related action.
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    In September 2020, the Commission adopted a new Exchange Act Rule 
21F-3(b)(3) to address situations where both the Commission's 
whistleblower program and at least one other, separate whistleblower 
award program might apply (hereinafter ``the Multiple-Recovery 
Rule'').\17\ As the Commission explained, the potential for another 
whistleblower award program to apply to a potential related action--and 
the accompanying risk of multiple recoveries--had become increasingly 
apparent over the course of the Commission's decade of experience 
implementing and administering the award program.\18\
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    \17\ The Commission stated that the purpose of Rule 21F-3(b)(3) 
was to prevent multiple recoveries, see Adopting Release, 85 FR 
70908, and cited as the basis for adopting such rules the provision 
in Exchange Act Section 21F(b)(1) that states awards are to be made 
based on ``regulations prescribed by the Commission,'' the specific 
rulemaking authority of Exchange Act Section 21F(j) to issue rules 
governing the whistleblower program, and the Commission's general 
rulemaking authority in Exchange Act Section 23(a), see id. at 70902 
& n.20.
    \18\ See id. at 70908.
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    The Multiple-Recovery Rule authorizes the Commission to pay an 
award on an action potentially covered by a second award program only 
if the Commission determines that the SEC's whistleblower program has a 
more direct or relevant connection to the action than the other award 
program. To assess whether a potential related action has a more 
``direct or relevant'' connection to the SEC's program or the other 
potentially applicable program, the Multiple-Recovery Rule provides 
that the Commission will consider: (i) The relative extent to which the 
misconduct charged in the potential related action implicates the 
public policy interests underlying the Federal securities laws (such as 
investor protection) rather than other law-enforcement or regulatory 
interests; (ii) the degree to which the monetary sanctions imposed in 
the potential related action are attributable to conduct that also 
underlies the Federal securities law violations that were the subject 
of the Commission's covered action; and (iii) whether the potential 
related action involves state-law claims, as well as the extent to 
which the state may have a whistleblower award program that potentially 
applies to that type of law-enforcement action.
    Another provision of the Multiple-Recovery Rule directs that if a 
related-action claimant has already received an award from another 
program, that claimant will not receive an award from the Commission. 
Relatedly, the Multiple-Recovery Rule provides that if a related-action 
claimant was denied an award from the other program, the claimant will 
not be able to re-adjudicate any fact decided against him or her by the 
other program. And if the Commission decides that the SEC's 
whistleblower program has the more direct or relevant connection to the 
potential related action, the Multiple-Recovery Rule provides that no 
payment will be made on the award unless the claimant promptly and 
irrevocably waives any claim to an award from the other program.
    In adding the Multiple-Recovery Rule to Exchange Act Rule 21F-3(b), 
the Commission explained that it was ``codif[ying] the approach the 
Commission has previously taken where another award program is 
available in connection with an action for which a related-action award 
is sought.'' \19\ Further, the Commission explained that permitting 
multiple recoveries on the same related action could be viewed as 
inconsistent with congressional intent in two respects. First, it could 
result in a whistleblower recovering in excess of the 30 percent 
ceiling that Congress has established for Federal whistleblower award 
programs in the modern era.\20\ Second, the related-action component of 
the SEC's Whistleblower Program is structured under Section 21F of the 
Exchange Act as a supplemental component of the program. If the 
Commission is able to bring a successful covered action based on the 
whistleblower's original information, then the whistleblower is given 
an opportunity to obtain additional financial rewards for the ancillary 
recoveries that may be collected in a related action based on that same 
original information. But the Commission explained that neither the 
text nor the legislative history of Section 21F indicated that Congress 
intended this ancillary component of the SEC's whistleblower program to 
displace or otherwise operate as an alternative to a more directly 
relevant award program that may be specifically tailored to apply to a 
specific type or class of actions. The Commission also observed that in 
situations where another program would apply, the other award program 
should provide a sufficient financial incentive to encourage 
individuals to report misconduct without the need for any additional 
incentive from the related-action component of the Commission's 
whistleblower program.\21\
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    \19\ Id.
    \20\ The Commission further explained that it was unaware of any 
time in the modern era in which legislation had authorized the 
Federal Government to share with a whistleblower more than 30 
percent of its monetary recovery from a successful action.
    \21\ See 85 FR 70909.
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    Since the Multiple-Recovery Rule was adopted, the Commission has 
received (or otherwise learned of the potential for) a number of 
whistleblower award applications involving potential related actions 
that implicate (or may implicate) at least one other award program. Of 
particular significance, some of these recent matters concern the 
whistleblower award program that is administered in connection with the 
Financial Institutions Reform, Recovery and Enforcement Act of 1989 
(``FIRREA''), which has a statutory cap of only $1.6 million (``FIRREA 
awards program'').\22\ As suggested above, an important consideration 
underlying the adoption of the Multiple-Recovery Rule was that--even 
with the Commission's determination not to pay on potential related 
actions that have a more direct or relevant connection to an 
alternative award program--the adoption of the Multiple-Recovery rule 
would not appreciably impact a potential whistleblower's financial 
incentive to come forward. As the Commission explained, this is because 
potential ``whistleblowers would still stand to receive an award'' from 
the Commission on the covered action and from the other program on the 
potential related

[[Page 9284]]

action.\23\ This assumption may not be justified, however, under 
limited circumstances in which an alternate whistleblower program 
provides significantly fewer financial incentives than the Commission's 
program. This seems most likely where the other award program has 
either a much lower award range than the Commission's program or has an 
absolute dollar ceiling for all awards.
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    \22\ See Attorney General Holder's Remarks on Financial Fraud 
Prosecutions at NYU School of Law (Sept. 17, 2014) (referring to 
this $1.6 million cap as a ``paltry sum'' that ``is unlikely to 
induce an employee to risk his or her lucrative career in the 
financial sector'' by reporting financial crimes).
    \23\ See 85 FR 70908.
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    Relatedly, we are concerned that the Multiple-Recovery Rule as 
currently structured creates a risk that two otherwise similarly 
situated meritorious whistleblowers whose tips led to comparably 
successful Commission and related actions would receive meaningfully 
different awards based solely on the award program to which the actions 
in question were more directly related or relevant. This potential for 
disparate treatment seems needlessly unfair given that the potential 
disparate results are not compelled by the statute, would not be 
connected to any relevant differences in either the claimants' own 
efforts or the facts of the underlying related actions (such as the 
amounts collected, which are relevant to calculating the money paid to 
whistleblowers under Section 21F(b) of the Exchange Act), and would not 
be grounded in any obvious SEC policy goals or programmatic 
considerations.
    Based on the foregoing concerns, the Commission is offering for 
public comment several proposals to change Rule 21F-3(b)(3). The 
principal proposal being offered is the ``Comparability Approach'' (see 
Part II(A)(1) below). The Comparability Approach would retain the 
current rule but would make certain narrowly tailored amendments to 
address the fairness concerns identified above. The Comparability 
Approach would also allow the Commission to deem a matter eligible for 
related-action status in any case in which the maximum award that the 
Commission could pay on that action would not exceed $5 million, 
without assessing which of the two comparable whistleblower programs 
had the more direct and relevant connection to the action.
    Another alternative being offered for public comment is the 
``Whistleblower's Choice Option'' (see Part II(A)(2) below). It would 
involve a repeal of current Rule 21F-3(b)(3) in favor of an approach 
that would no longer permit the Commission the exclusive authority to 
forgo processing an otherwise meritorious award claim simply because 
another award program may have a more direct or relevant connection to 
the underlying action.\24\
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    \24\ The Commission intends to make a clarifying amendment to 
Exchange Act Rule 21F-11(c) so that it states that the Office of the 
Whistleblower is authorized to contact the agency or entity 
administering an alternative award program to ensure that the 
related-action award claimant has fully complied with the terms of 
Exchange Act Rule 21F-3(b)(3) when a second, alternative award 
program is implicated by an underlying action. If the Commission is 
ultimately unable to receive the information that it needs to ensure 
to its satisfaction that the claimant has fully complied with Rule 
21F-3(b)(3), this can be a basis for denying the award claim. The 
authorization that would be expressly added to Rule 21F-11(c) by the 
proposed amendment follows presently from the operation of existing 
Rule 21F-3(b)(3) and the proposed amendment would merely confirm 
that authority.
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    Finally, the Commission is offering for public comment the ``Offset 
Approach'' and the ``Topping Off Approach'' (see Part II(A)(3) below). 
Under the Offset Approach, Rule 21F-3(b)(3) would be repealed in its 
entirety in favor of a rule that would allow the Commission to make an 
award irrespective of the potential that another award program might 
apply, but to prevent a double recovery the Commission would offset 
from the Commission's award any amount that other program paid on the 
action. Under the Topping-Off Approach, the current Rule 21F-3(b)(3) 
framework would be retained but the Commission would be granted the 
discretion to ``top off'' a covered-action award--that is, increase the 
award amount on the Commission's own covered action (up to a total 
award of 30 percent)--if the Commission, in its discretion, concludes 
that the other whistleblower program's award for the non-SEC action was 
inadequate.
1. The Comparability Approach
    The Comparability Approach primarily focuses on situations where 
the maximum potential award that the alternative award program could 
authorize for an action would be an amount meaningfully lower than the 
maximum related-action award the Commission could grant (i.e., 30 
percent ``in total, of what has been collected of the monetary 
sanctions imposed'') either because the program involves a different 
award range or because it imposes a statutory award cap.\25\ An example 
of an award program that lacks a range comparable to the Commission's 
program is the Indiana securities-law whistleblower award program; 
under the Indiana program, whistleblower awards may not exceed 10 
percent of the money collected in a state securities-law enforcement 
action.\26\ Examples of award programs that have low statutory caps are 
the FIRREA award program,\27\ which has a $1.6 million cap,\28\ and the 
program administered in connection with the Major Frauds Act, which has 
a cap of $250,000.\29\
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    \25\ The proposed rule would also provide that a program would 
not be deemed comparable if awards under that program are entirely 
discretionary. Our own experience with a discretionary award program 
prior to the enactment of Exchange Act Section 21F's mandatory award 
program leads us to have significant concerns that discretionary 
programs may not have the same programmatic importance to agencies, 
and may not be administered with the same rigor, as mandatory award 
programs. See Office of the Inspector General, Assessment of the 
SEC's Bounty Program, Report No. 474 (March 29, 2009), at 4-5, 
available at www.sec.gov/about/offices/oig/reports/audits/2010/474.pdf (stating that the Commission made five awards totaling less 
than $160,000 over the 20-year period from 1989 until 2009 under its 
former insider-trading ``bounty program'' for which ``bounty 
determinations, including whether, to whom, or in what amount to 
make payments, [were] within the sole discretion of the SEC''). That 
prior experience also suggests to us that discretionary programs may 
garner lower levels of interest from the public because of the 
additional uncertainty of receiving an award. See id. (explaining 
that the ``Commission ha[d] not received a large number of 
applications from individuals seeking a bounty'' and that the 
program was ``not widely recognized inside or outside the 
Commission''). Together these factors may substantially reduce the 
willingness of whistleblowers to blow the whistle. See Letter from 
Kohn, Kohn & Colapinto, LLP, Comment offered in connection with 
Proposing Release No. 34-83557 regarding Related Actions and 
Proposed Rule 21F-3(b)(4) (Sept. 10, 2020), available at https://www.sec.gov/comments/s7-16-18/s71618-7797952-223596.pdf (stating 
that discretionary award programs do ``not meet the same standards'' 
that Exchange Act Section 21F establishes). To forestall this risk, 
we think it appropriate to deem discretionary programs presumptively 
lacking sufficient comparability to our own program for purposes of 
Proposed Rule 21F-3(b)(3).
    \26\ See Indiana Code 23-19-7-1 et seq.
    \27\ FIRREA authorizes DOJ to sue for civil penalties when a 
person engages in certain criminal conduct, including mail, wire, 
and bank fraud. A court may impose penalties up to $1 million per 
violation or $5 million for a continuing violation. 12 U.S.C. 
1833a(b)(1) and (2). Further, a court may award greater penalties 
depending on the amount of the violator's gain or victims' losses 
that are connected to the FIRREA violations. Id. at 1833a(b)(3) 
(providing that a court may impose higher pecuniary penalties if 
either the amount of the wrongdoer's pecuniary gain from the FIRREA 
violation or the amount of the pecuniary loss to a victim exceeds 
the penalty amounts specified in the statute, although any penalty 
may not exceed the total amount of the wrongdoer's gains or the 
victims' losses).
    \28\ Under the FIRREA award program a whistleblower is entitled 
to between 20 percent and 30 percent of the first $1 million 
recovered pursuant to the execution of a judgment, order, or 
settlement, between 10 percent and 20 percent of the next $4 million 
recovered, and between 5 percent and 10 percent of the next $5 
million recovered. Id. at 4205(d)(1)(A)(i). Thus, awards under this 
program are effectively capped at $1.6 million (i.e., 30 percent of 
$1 million [$300,000] plus 20 percent of the next $4 million 
[$800,000], plus 10 percent of the next $5 million [$500,000] but 
nothing beyond that). Id. at 4205(d)(2).
    \29\ 18 U.S.C. 1031(g).
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    The Comparability Approach would address situations involving 
similar low award caps by generally excluding them

[[Page 9285]]

from the Multiple-Recovery Rule.\30\ Specifically, under the 
Comparability Approach, the Multiple-Recovery Rule would not apply if 
the maximum potential award that the other program could grant in 
connection with a related action would be meaningfully lower than the 
maximum amount the Commission could award to that whistleblower on that 
same action.\31\ To implement this modification, the opening sentence 
of Rule 21F-3(b)(3) would be amended to provide that the rule does not 
apply unless the other whistleblower program is a ``comparable 
whistleblower program.'' \32\ ``Comparable whistleblower program'' 
would be defined in a new paragraph (b)(3)(iv)(A) of Rule 21F-3 to mean 
an award program that does not have an award range or award cap that 
would restrict the total maximum potential award from that program to 
an amount that is meaningfully lower than the maximum potential award 
to all eligible claimants (in dollar terms) that the Commission could 
make on the particular action.\33\ Taken together, these proposed 
amendments if adopted would mean that when the Commission determines 
that another award program fails to qualify as a ``comparable award 
program,'' Rule 21F-3(b)(3) would not apply and could not be used as a 
basis for denying an award on the potential related action.\34\
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    \30\ The FIRREA award program and the Major Fraud Act award 
program are discretionary, and thus would be excluded under the 
Comparability Approach for this additional reason, see supra note 
25. As a result, the low-award caps that those programs establish 
are referenced here purely for illustrative purposes.
    \31\ In assessing comparability, the Commission intends to 
compare the total amount that the other award program could award to 
all eligible whistleblowers for the potential related action to the 
total amount that the Commission's award program could make to those 
individuals based on that same potential related action.
    \32\ The words ``another whistleblower program'' in the opening 
sentence of Rule 21F-3(b)(3) would be replaced with ``comparable 
whistleblower program.''
    \33\ As discussed supra in note 25, an award program would not 
be comparable if it were discretionary instead of mandatory. To 
effectuate this, new paragraph (b)(3)(iv)(A) would also provide that 
an award program is not comparable if the authority or entity 
administering the other program possesses sole discretion to deny an 
award notwithstanding the fact that a whistleblower otherwise 
satisfies the established eligibility requirements and award 
criteria.
    \34\ The Commission has not proposed to include eligibility 
criteria or award conditions in the assessment of an award program's 
comparability to the Commission's. This is because other authorities 
that are administering whistleblower programs may shape those 
programs through eligibility criteria and award conditions that 
reflect each agency's own policy choices (or in some instances 
Congress's policy choices), just as many of the Commission's own 
eligibility criteria and award conditions reflect important policy 
considerations. But the Commission also recognizes that there could 
be some instances where the lack of comparability between the 
eligibility criteria and award conditions of the Commission's 
whistleblower program and those of another agency's whistleblower 
program could create an undue burden or significant hardship to the 
claimant. When these instances arise, the Commission could employ 
its discretionary waiver authority under Section 36(a) of the 
Exchange Act to include the related action within the scope of the 
Commission's award program if the particular facts and circumstances 
warrant doing so. The flexibility that Section 36(a) provides seems 
particularly well suited in these instances given the myriad and 
varied competing interests that may be implicated.
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    In addition, the Comparability Approach would provide that, after 
determining that the two programs are comparable, the Commission would 
deem a matter eligible for related-action status without regard to 
which program has the more direct and relevant connection to the action 
if the maximum award the Commission could have to pay in the related 
action would not exceed $5 million.\35\ This condition would be 
satisfied in any case where 30 percent of the monetary sanctions 
ordered to be collected by the other agency is $5 million or less; if 
so, then the action would be eligible to qualify as a related action 
under the Commission's program. Similar to what the Commission 
explained when in 2020 it adopted the $5 million award presumption in 
Rule 21F-6(c), we believe that permitting an action to automatically 
qualify as a related action under these circumstances would help save 
whistleblowers time and effort, as well as Commission staff. 
Whistleblowers who must file an award application with another wholly 
unrelated program are likely to incur additional burdens in doing so, 
including familiarizing themselves with any potentially applicable 
rules. When the maximum award amount based on the monetary sanctions 
paid out in the action would not exceed $5 million, we think it is 
reasonable to allow the whistleblower to pursue any related-action 
claim with the Commission (via a process with which the whistleblower 
will be familiar given the whistleblower's previous filing of a 
covered-action award). Additionally, because the Comparability Approach 
would require Commission resources to assess award comparability in 
each related-action claim that potentially implicates an alternative 
award program, the $5 million threshold would help promote the timely 
administration and efficiency of the award process.
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    \35\ The Commission has chosen to base the $5 million threshold 
on the maximum potential award that the Commission could be required 
to pay, rather than rely on the monetary sanctions that have been 
collected and are likely to be collected in the future. Our 
experience demonstrates that we often do not have the same 
visibility into the likelihood of collecting an award in another 
agency's action that we do in the context of our own SEC actions, 
particularly given that a determination would potentially be 
required prior to the exhaustion of the other agency's collection 
efforts. Therefore, for purposes of administrative efficiency, we 
believe it is appropriate to use an objective reference point which 
will be available at the time the Commission is determining whether 
to grant a related-action award.
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    We do not think this $5 million threshold would impose an undue 
strain on the staff to process a related-action award to a final order, 
nor do we think it will pose risks to the solvency of the IPF. In order 
for a whistleblower to obtain the benefit of this new $5 million 
threshold provision, however, the whistleblower will need to make an 
irrevocable waiver of any claim to an award from the other program and 
otherwise comply with the other procedural obligations that would be 
imposed by amended Rule 21F-3(b)(3).
    Below is a decision tree that outlines how the Commission would 
apply the Comparability Approach described above:
    Step 1. Determine whether another whistleblower program that might 
apply to a potential related (non-SEC) action for which a claimant is 
seeking an award.
     If yes, continue to step 2.
     If no, the matter would be treated as a potential related 
action and the Commission would process the claimant's award 
application against the general award criteria and eligibility 
requirements of the whistleblower rules.
    Step 2. If there is another program that applies to the potential 
related action, determine whether it is a ``comparable award program.'' 
\36\
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    \36\ As proposed, a ``comparable award program'' would be a 
whistleblower award program administered by an authority or entity 
other than the SEC: (i) That ``does not have an award range that 
could operate in a particular action to yield an award for a 
claimant that is meaningfully lower (when assessed against the 
maximum and minimum potential awards that program would allow) than 
the award range that the Commission's program could yield (i.e., 10 
to 30 percent of collected monetary sanctions)''; (ii) that ``does 
not have a cap that could operate in a particular action to yield an 
award for a claimant that is meaningfully lower than the maximum 
award the Commission could grant for the action (i.e., 30 percent of 
collected monetary sanctions in the related action)''; and (iii) in 
which the authority or entity administering the program does not 
have discretion to ``deny an award notwithstanding the fact that a 
whistleblower otherwise satisfies the established eligibility 
requirements and award criteria.''
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     If the other award program is comparable, proceed to step 
3.
     If the other program is not comparable, the matter would 
be treated as a potential related action and the Commission would 
process the

[[Page 9286]]

claimant's award application against the general award criteria and 
eligibility requirements of the whistleblower rules.
    Step 3. If the program is comparable, then determine whether 
either: (1) The absolute maximum payout the Commission could make on 
the potential related action is $5 million or less (i.e., 30 percent of 
the monetary sanctions ordered is $5 million or less); or (2) the SEC's 
award program has the more direct or relevant connection to the action 
(relative to the other program) based on the facts and circumstances of 
the action.
     If the answer to both (1) and (2) in step 3 is ``no,'' 
then the matter is not a related action.
     If the answer to (1) and/or (2) in step 3 is ``yes,'' the 
matter would be treated as a potential related action and the 
Commission would process the claimant's award application against the 
general award criteria and eligibility requirements of the 
whistleblower rules.
    Beyond the proposed changes discussed above, Rule 21F-3 would be 
revised to include a new paragraph (b)(3)(iv)(B) providing that the 
Commission will make a determination about comparability on a case-by-
case basis. Further, a new paragraph (b)(3)(iv)(C) would be added to 
Rule 21F-3 to state that if the Commission grants an award on a 
related-action application that involves an alternative program that is 
not comparable, the claimant must, within 60 calendar days of receiving 
notice of the award, make an irrevocable waiver of any claim to an 
award from the other program.
    Relatedly, a new paragraph (b)(3)(iv)(D) would be added to Rule 
21F-3 to afford the Commission robust authority to ensure that an 
irrevocable waiver has been made. New paragraph (3)(b)(iv)(D) would 
make clear that a claimant whose related-action award application is 
subject to the provisions of Rule 21F-3 has the affirmative obligation 
to demonstrate to the satisfaction of the Commission that the claimant 
has complied with the terms and conditions of the proposed rule 
regarding an irrevocable waiver. Proposed paragraph (b)(3)(iv)(D) would 
also amend Rule 21F-3 to provide that a claimant must take all steps 
necessary to authorize the administrators of the other award program to 
confirm to staff in the Office of the Whistleblower (or in writing to 
the claimant or the Commission) that an irrevocable waiver has been 
made.
    Further, a new paragraph (b)(3)(v) would be added to Rule 21F-3 to 
require a claimant to promptly notify the Office of the Whistleblower 
that they are seeking or have sought an award for a potential related 
action from another award program.\37\ And a paragraph (b)(3)(vi) would 
be added to advise claimants that the failure to comply with any of the 
conditions or requirements of an amended Rule 21F-3(b)(3) ``may'' 
result in the Commission deeming the claimant ineligible for the 
related action at issue.
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    \37\ In addition to the changes discussed above, Rule 21F-
3(b)(3)(iii) would be amended so that the existing reference to a 
``prompt, irrevocable waiver'' specifies that the waiver must be 
made within 60 calendar days of the claimant receiving notice of the 
Commission's award determination. This change would ensure that the 
timing for an irrevocable waiver is consistent throughout Rule 21F-
3(b)(3). Further, certain stylistic and clarifying modifications 
would be made to the existing three sentences of Rule 21F-
3(b)(3)(iii), and each of these revised sentences would be broken 
out into new paragraphs (b)(3)(iii)(A) through (C). Finally, the 
Commission is proposing to revise the first sentence of Rule 21F-
3(b)(3)(iii). In its current form, that sentence provides that the 
Commission will not issue an award determination for a potential 
related action if another program has already issued an award 
determination to the claimant based on that action. The Commission 
is proposing to replace that sentence with a new paragraph 
(b)(3)(iii)(A) that would provide that the Commission's ability to 
discontinue processing a claimant's related-action award application 
is triggered only by the claimant's receipt of any payment from the 
other program. This modification would strike a better balance in 
terms of fairness to claimants because the receipt of a payment from 
the other program is an action that a claimant has control over, but 
a claimant often will have little control over the processing time 
for award applications.
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    Finally, the Commission contemplates that the Comparability 
Approach would apply as follows in situations where two or more 
whistleblowers who were not acting jointly contributed to the success 
of a related action.\38\ If the Commission determined that the other 
agency's award program was not comparable or that the maximum award 
payable would not exceed $5 million, each whistleblower would be able 
to determine separately whether to proceed under the Commission's 
program or the other award program. Further, as is the case with all 
related-action claims involving multiple, independent whistleblowers, 
each claimant's application would be assessed separately to determine 
whether the applicant qualifies for an award. And in determining the 
appropriate award amount for any meritorious whistleblower who has 
elected to proceed under our program, the award guidelines and 
considerations specified in 17 CFR 240.21F-5 (Rule 21F-5) and Rule 21F-
6 would be used. In making its award assessment for any whistleblower 
proceeding under the SEC's program, the Commission may consider the 
relative contributions of any whistleblower who opted to proceed under 
the alternative whistleblower program rather than the Commission's 
program. That said, in no event would the total award paid out on a 
related action to all the meritorious whistleblowers who proceed under 
the Commission's program be less than 10 percent or greater than 30 
percent of the total monetary sanctions collected in the related 
action.\39\
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    \38\ See generally Section 21F(a)(6) of the Exchange Act 
(referring to ``2 or more individuals acting jointly'' to provide 
information to the Commission).
    \39\ Individuals who work jointly to provide the Commission with 
information are treated as a single unit for assessing eligibility 
requirements, applying the award criteria, and determining a 
specific award amount. Consistent with this approach, such 
individuals would have to determine jointly whether to proceed under 
the Commission's program or the other program.
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2. Whistleblower's Choice Option
    As an alternative to either maintaining Rule 21F-3(b)(3) in its 
current form or modifying it as described above (Comparability 
Approach), the Commission is requesting public comment on a third 
approach, the Whistleblower's Choice Option. Under this option, the 
Commission would process an application for a related-action award 
without regard to whether a separate award program might also apply to 
that action and irrespective of the whistleblower's decision to apply 
for an award from the other award program. Under the Whistleblower's 
Choice Option, the Commission would process the related-action award 
application just as it does for related-action applications that do not 
implicate separate award programs. And if both the Commission and the 
other program grant an award, the Whistleblower's Choice Option would 
allow the whistleblower to determine which award to accept. For 
example, if a whistleblower received separate award offers from the 
Commission and the Internal Revenue Service of the United States 
(``IRS'') on the same underlying action, the whistleblower would be 
able to consider both programs' award offers and select the higher 
offer.
    A revised rule embodying the Whistleblower's Choice Option would 
not permit the claimant to receive payment on both awards; the 
meritorious whistleblower would need to make a choice between the two 
awards. To ensure that the claimant would not receive payment on the 
same action from both programs, this proposed alternative would require 
that a claimant identify any award program other than the SEC's to 
which the claimant had applied. Before receiving any payment from the 
Commission on a related-action award, the claimant

[[Page 9287]]

would be required to irrevocably waive any award (or claim to an award) 
from the other program.
    The critical feature of the Whistleblower's Choice Option is that--
unlike Rule 21F-3(b)(3) in its current form or as modified to 
incorporate the Comparability Approach discussed above--the claimant, 
not the Commission, would decide which program should pay any award for 
a potential related action. The Commission would not account for the 
existence of another potentially applicable award program in its 
assessment of the claimant's award eligibility or award offer. Rather, 
the Commission would consider the existence of the alternative award 
program only at the payment stage, when it would be required to 
determine that the whistleblower had irrevocably waived any and all 
rights to an award from the other program before making the related-
action award payment.
    A potential benefit of the Whistleblower's Choice Option is that 
the Commission and the staff would no longer be required to determine 
which award program has a more ``direct or relevant'' connection to the 
related action. Such determination can entail difficult assessments, 
the resolution of which can increase overall award processing time.
    There are countervailing considerations that--at least 
preliminarily--may militate in favor of the Comparability Approach. 
First, under the Whistleblower's Choice Option, whistleblowers who 
apply to both programs would get two separate opportunities to 
demonstrate that they should receive an award.\40\ This could produce a 
situation in which the Commission and another agency made conflicting 
factual determinations after reviewing the same related action. 
Separately, irrespective of whether another whistleblower award program 
has a more direct or relevant connection to a matter upon which a 
whistleblower is seeking a related-action award, a whistleblower could 
attempt to use the Commission's Whistleblower Program to overcome or 
avoid the failure to satisfy a significant eligibility requirement 
imposed by the other program.
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    \40\ The Commission has previously articulated a view that a 
whistleblower should not have multiple bites at the adjudicatory 
apple. See, e.g., 83 FR 34711; 76 FR 34305.
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    Second, the Whistleblower's Choice Option could slow the overall 
processing of award claims given the limited staff resources and the 
likelihood that this approach would increase the staff's administrative 
workload.\41\ Unlike either existing Rule 21F-3(b)(3) or the approach 
contemplated by the Comparability Approach, the Whistleblower's Choice 
Option could require the Commission to fully process every application 
for a related-action award that also implicates a second award program. 
Under Rule 21F-3(b)(3)'s existing framework, by contrast, the staff is 
not required to work with officials at the authority or entity that 
handled the underlying action to develop an administrative record 
regarding the claimant's contributions to the other action. Rather, 
under the existing framework, the Commission first analyzes the 
relative relationship of each award program to the underlying action 
and, if it determines that the Commission's award program lacks the 
more direct or relevant connection to the action, it issues a final 
order on this ground. This approach avoids the more time consuming and 
challenging work often involved with understanding the whistleblower's 
contribution to the potential related action and assessing whether the 
various conditions for an award have been satisfied. But if the 
Whistleblower's Choice Option were adopted to replace the current 
framework, it would displace the threshold ``direct or relevant'' 
inquiry and the staff would generally process each related-action 
application on the merits of the whistleblower's claim to an award.
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    \41\ Processing claims for related-action awards generally takes 
longer than the processing of award claims for SEC covered actions. 
This is because Commission staff must often communicate with, and 
obtain information from, staff from the other agency to determine 
whether the claimant voluntarily provided new information that led 
to the other agency's enforcement action in order to determine if 
the claimant is eligible for a related-action award. Commission 
staff must also obtain appropriate documentation from the other 
agency to confirm collections in the related action and prepare an 
accompanying declaration from a staff attorney memorializing for the 
record the relevant information regarding the related action.
---------------------------------------------------------------------------

    To implement the Whistleblower's Choice Option, the current version 
of Rule 21F-3(b)(3) would be repealed in its entirety and replaced by a 
new Rule 21F-3(b)(3) that would specify the ``terms and conditions'' 
that would apply whenever at least one other award program potentially 
applied to an action. Paragraph (b)(3)(i) of the revised rule would 
provide that if the Commission determines that a claimant qualifies for 
an award for the related action, any payment of that award by the 
Commission would be conditioned on that claimant making an irrevocable 
waiver of any award or potential award from the other program. 
Paragraph (b)(3)(i) would also prohibit the Commission from considering 
the existence of the alternative program or the amount of that 
program's award (if one has already been issued) in its own 
consideration of the claimant's right to a related-action award or its 
determination about the proper amount of any award. Paragraph 
(b)(3)(ii) would provide that the Commission will not make an award on 
a related action (or pay on an award if one has already been issued), 
if the claimant receives any payment from the other award program. 
Paragraph (b)(3)(iii) would require that the claimant make an 
irrevocable waiver of any award from the other program within 60 
calendar days of the later of either a claimant learning of the 
Commission's award amount or a claimant learning of the other program's 
award offer. Further, new paragraph (b)(3)(iv) of Proposed Rule 21F-
3(b)(3) would provide that a claimant must comply with the irrevocable-
waiver requirement of paragraph (b)(3)(i) of the proposed revised 
rule.\42\ A proposed paragraph (b)(3)(v) of a revised Rule 21F-3(b)(3) 
would impose an affirmative obligation on a claimant seeking a related-
action award to promptly notify the Office of the Whistleblower if that 
claimant was seeking an award on that same action from another agency. 
A proposed paragraph (b)(3)(vi) would be added to advise claimants that 
the failure to comply with any of the conditions or requirements of an 
amended Rule 21F-3(b)(3) may result in the Commission deeming the 
claimant ineligible for the related-action at issue.
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    \42\ Placing this affirmative obligation on claimants would help 
ensure that those subject to Rule 21F-3(b)(3) are adhering to the 
terms and requirements of the proposed rule. The proposed rule 
language to achieve this would be nearly identical to comparable 
language in the Comparative Approach detailed in Part II(A), supra. 
This rule text would provide that a claimant must take all steps 
necessary to authorize the administrators of the other award program 
to confirm to staff in the Office of the Whistleblower (or in 
writing to the claimant or the Commission) that an irrevocable 
waiver has been made.
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    Finally, the Commission contemplates that the Whistleblower's 
Choice Approach would apply as follows in situations where two or more 
whistleblowers who were not acting jointly contributed to the success 
of a related action and subsequently filed award applications with the 
Commission.\43\ As is the case with all related-action claims involving 
multiple, independent whistleblowers, each claimant's application will 
be assessed independently of any other's to determine whether the 
claimant

[[Page 9288]]

qualifies for an award. Assuming there are two or more meritorious 
whistleblowers, the Commission would, consistent with its general 
practice, include within its award determinations consideration of each 
whistleblower's relative contributions to the success of the related 
action (with the total award no lower than 10 percent and no greater 
than 30 percent of monetary sanctions collected in the related action). 
Each whistleblower would then be able to determine whether to accept 
the Commission's award determination or instead waive the award 
determination and take an award from the other program.\44\ Thus, for 
example, if the Commission made an award of 10 percent to one 
whistleblower and 20 percent to another, if the first whistleblower 
waived the SEC's award and accepted an award from the other program, 
the second would be free to accept the SEC's 20 percent award.\45\
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    \43\ See generally Section 21F(a)(6) of the Exchange Act 
(referring to ``2 or more individuals acting jointly'' to provide 
information to the Commission).
    \44\ Individuals who work jointly to provide the Commission with 
information are treated as a single unit for assessing eligibility 
requirements, applying the award criteria, and determining a 
specific award amount. Consistent with this approach, under the 
Whistleblower's Choice Option, such individuals would have to 
determine jointly whether to accept an award from the Commission or 
to waive the Commission's award determination in favor of the other 
program's award determination.
    \45\ A decision by one whistleblower to reject an SEC award 
offer would not impact the award amount offered or paid to any other 
whistleblowers. The award amounts offered to each whistleblower 
would not depend on whether any of the whistleblowers opted to 
decline the Commission's award offer. This means, among other 
things, that the 30-percent presumption established by Rule 21F-6(c) 
would not be applied to revise a whistleblower award upward as a 
result of another whistleblower's determination to decline an award 
from the Commission's program. Proceeding in this way is consistent 
with the provision of the proposed rule that states the ``Commission 
shall proceed to process the application without regard to the 
existence of the alternative award program,'' which includes any 
decisions the another whistleblower makes about taking an award 
offered by that other program in lieu of an award offered by the 
Commission's program.
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3. Other Alternatives
    In addition to the Comparability Approach and the Whistleblower's 
Choice Option, there are two other potential alternative approaches on 
which the Commission seeks comment: The Offset Approach; and, the 
Topping-Off Approach. Both would involve replacing the Multiple-
Recovery Rule. Under both of these two approaches, a whistleblower 
would be permitted to receive a payment from both the Commission's 
program and another entity's whistleblower program; the Commission 
would not require whistleblowers to waive their claims to awards from 
another program as a pre-condition to recovering under the Commission's 
program.\46\ As discussed below, both raise potential administrative 
issues that might counsel against their adoption.
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    \46\ Similar to the Whistleblower's Choice Option, these 
alternatives would begin with the Commission determining its award 
percentage applicable to the related action, and would proceed if an 
award from another program was lower than what would have been 
awarded by the Commission on the related action had the other 
program not existed.
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    Under the Offset Approach, the Commission would determine the award 
percentage it would otherwise pay on the related action but would 
offset from the Commission's total award payment the dollar amount the 
whistleblower receives for the related action from the other program's 
award.\47\ Put differently, the Offset Approach would require the 
Commission to make a related-action award even if another agency had 
already paid an award on that same action, but the Commission could 
reduce the amount it paid on its related-action award by the amount 
that the other agency paid. The fact that the whistleblower might 
receive an award from another program would have no bearing on the 
Commission's actual award determination; it would be relevant only when 
the Commission offset the award amount at the time of payment.\48\
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    \47\ The effect on the IPF from the ``Offset Approach'' would be 
difficult to assess with any confidence. Relative to the 
Comparability Approach, the Offset Approach could potentially 
increase the money paid from the IPF in some cases if a comparable 
program were to produce a meaningfully smaller than expected award 
and, as a result, an offset payment. However, in other instances, 
the Offset Approach could reduce the burden on the IPF, because the 
Commission would potentially be sharing responsibility with another 
award program for that related action.
    \48\ Pursuant to Exchange Act Section 21F(b), the Commission 
shall pay an award to one or more meritorious whistleblowers of 
``not less than 10 percent, in total, of what has been collected of 
the monetary sanctions imposed in the [Commission's] action or 
related actions[.]'' Under the Offset Approach, it is possible that 
the Commission's portion of the award payment could place the 
Commission in the position of making a related-action award that is 
less than 10 percent of the total amount collected. Alternatively, 
it could also result in a total reward to the claimant (when 
combined with the payment from the other program) that exceeds 30 
percent. As an illustration, if another program makes a 22 percent 
award on a related action, and if the Commission determines to 
provide an additional reward on top of the amount the other program 
will pay, then the Commission would be presented with the following 
dilemma: If the Commission's award is 8 percent or less, there would 
appear to be a conflict with Section 21F's 10 percent statutory 
minimum. But if the Commission makes an award greater than 8 
percent, the total payout would exceed the 30 percent statutory cap. 
For these reasons, the Commission has not designated the Offset 
Approach as one of the principal approaches under consideration.
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    Under the Topping-Off Approach, the current Rule 21F-3(b)(3) 
framework would be retained but the Commission would be granted the 
discretion to enhance or ``top off'' a covered-action award--that is, 
increase the award amount on the Commission's own covered action (up to 
a total award amount of 30 percent)--if the Commission concluded that 
the other whistleblower program's award for the non-SEC action was 
inadequate for any reason. A potential concern with this approach is 
that, as a practical matter, the Commission's ability to enhance or 
``top off'' a covered-action award to provide a whistleblower relief 
from a deficient award issued by another program for a non-SEC action 
would be limited in many instances. For example, when the covered-
action award already (i.e., prior to any enhancement to account for a 
deficient award from the other program for the non-SEC action) is at or 
near the statutory maximum 30 percent award authorized under Section 
21F(b), the Commission would not have the ability to grant a 
significant percentage enhancement. Similarly, if the monetary 
sanctions collected in the Commission's action are relatively small 
compared to the size of the related action's collected sanctions (e.g., 
a relatively small covered action involving $10 million in collected 
sanctions versus a much larger non-SEC action involving $100 million in 
collected sanctions), then the Commission's ability to provide relief 
by topping off the covered action may be limited because of the sheer 
size of the related-action relative to the Commission's action.
    Finally, both of these alternatives raise the concern that they 
would add significant delays to the Commission's ability to make timely 
award determinations whenever an action implicates another award 
program. This is because (unlike the Comparability Approach or the 
Whistleblower's Choice Option) the Offset Approach and the Topping-Off 
Approach would delay the Commission's ability to pay the final award 
amount to a meritorious whistleblower until after the other entity's 
award process has been completed.
Request for Comment
    1. Do any of the approaches discussed above implicate additional 
considerations that the Commission has not addressed in this proposing 
release but that you believe should be factored into the Commission's 
deliberations relating to potential amendments to Rule 21F-3(b)(3)? For 
example, should the proposals identify the potential consequences that 
might result if a

[[Page 9289]]

claimant fails to comply with the requirements of any amended rule?
    2. The Commission outlines above how it contemplates dealing with 
instances involving multiple whistleblowers under the Comparability 
Approach and the Whistleblower's Choice Option. If the Comparability 
Approach is adopted, is the Commission's proposed approach for 
addressing awards in the context of related actions involving multiple 
whistleblowers appropriate? Similarly, if the Whistleblower's Choice 
Option is adopted, is the Commission's proposed approach for addressing 
awards in the context of related actions involving multiple 
whistleblowers appropriate? Please explain. Should the Commission 
consider alternative approaches for dealing with related actions 
involving multiple whistleblowers under the Comparability Approach and 
Whistleblower's Choice Approach? Please explain and identify any 
alternatives that you believe the Commission should consider.
    3. Is the $5 million threshold proposed as part of the 
Comparability Approach the appropriate figure? Should the threshold be 
higher or lower? Please explain.
    4. The initial set of whistleblower program rules adopted in May 
2011 included a now-repealed version of Rule 21F-3(b)(3) that dealt 
only with the potential that a claimant could receive awards for the 
same related action from the Commission and the Commodity Futures 
Trading Commission (``CFTC''), whose new whistleblower program, like 
the SEC's, was authorized by the Dodd-Frank Act and includes a related-
action supplemental component. Under that original version of Rule 21F-
3(b)(3), the Commission stated that it would not pay an award on a 
related action if the CFTC had already made an award on that action, 
nor would the Commission allow the whistleblower to re-adjudicate any 
factual issues decided against the whistleblower as part of the CFTC's 
final order denying an award.\49\ Should the Commission reconsider this 
original version of Rule 21F-3(b)(3) instead of adopting one of the 
alternative options proposed in this release? If so, please explain why 
and what revisions to the original version might be appropriate.\50\
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    \49\ The 2011 adopting release explained that False Claims Act 
qui-tam suits are legally excluded from a related-action recovery 
under the Commission's whistleblower program. See 76 FR 34305. This 
interpretation remains in effect and is not a subject of this 
proposing release or otherwise opened for reconsideration as part of 
this ongoing rulemaking process. Id.
    \50\ See Letter from Kohn, Kohn & Colapinto, LLP, Comment 
offered in connection with Proposing Release No. 34-83557 regarding 
Related Actions and Proposed Rule 21F-3(b)(4) (Sept. 10, 2020) 
(recommending that the Commission expand the 2011 version of Rule 
21F-3(b)(3) that ``prohibit[ed] double awards under the [Commodity 
Exchange Act] to include other similar whistleblower reward laws'').
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    5. Proposed Rule 21F-3(b)(3)(iii)(A) directs that the Commission 
shall not make a related-action award to a claimant (or any payment on 
a related-action award if the Commission has already made an award 
determination) if the claimant has already received any payment from 
the other program for that potential related action. Rather than cut 
off the potential for an award payment from the SEC in this situation, 
should the Commission consider adopting in this limited situation some 
form of an offset mechanism similar to the Offset Approach discussed 
above? Please explain.
    6. Instead of the current Rule 21F-3(b)(3) and the alternatives 
discussed above (including the alternative referenced in the prior 
question and the alternatives discussed in Part II(A)(3)), should the 
Commission consider a different approach, such as: (i) Leaving the text 
of Rule 21F-3(b)(3) unchanged; or (ii) adopting a hybrid approach that 
would implement the Whistleblower's Choice option below a maximum 
potential award threshold, and above that threshold retain the current 
Rule 21F-3(b)(3) framework that considers which program has the more 
direct or relevant connection to the action? Please identify the 
alternative approach that you support, explain why you believe that 
approach should be adopted, and explain how the specific approach you 
support should work.
    7. As described above, the Comparability Approach would apply in 
any situation where another award program (were it to apply) has an 
award range or an award cap that would yield an award ``meaningfully'' 
lower than the amount the Commission's program would likely offer (but 
above a $5 million maximum award that might be paid by the Commission). 
As discussed, the Comparability Approach would also apply where awards 
under another award program are discretionary rather than mandatory. In 
assessing whether an award from another award program (greater than the 
$5 million threshold) would be ``meaningfully lower'' than the maximum 
amount that might be awarded under the Commission's award program, 
should the Commission establish a fixed dollar or percentage difference 
as an alternative to the ``meaningfulness'' standard? If so, please 
explain why a uniformly applied fixed dollar or percentage amount would 
be better. If possible, please also identify the dollar or percentage 
amount of the potential difference that the Commission should use to 
determine that the other program's award is not meaningfully lower, and 
please explain why that dollar or percentage amount is appropriate.
    8. If the Comparability Approach is adopted, should the Commission 
also incorporate eligibility and award conditions into the definition 
of ``comparable whistleblower program''?\51\ For example, should 
comparability include consideration of the absence of robust 
confidentiality protections or anonymity provisions similar to those 
under which the Commission's whistleblower program operates?\52\ Are 
there other factors that the Commission should take into account to 
determine if another whistleblower program is comparable to the 
Commission's award program? With respect to the foregoing, if you 
believe that additional factors should be added to assess a program's 
comparability, please identify those factors and explain why they 
should be considered in determining whether another award program is 
comparable.
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    \51\ See supra note 34 (explaining the Commission's rationale 
for not including eligibility criteria and award conditions in the 
assessment of the other award program's comparability).
    \52\ See, e.g., Section 21F(h)(2) (heightened confidentiality 
protections); Exchange Act Rule 21F-7, 17 CFR 240.21F-7 
(confidentiality and anonymity protections).
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    9. Both the Comparability Approach and the Whistleblower's Choice 
Option would require that a claimant irrevocably waive and promptly 
forgo an award from the other potentially relevant award program. 
Should the Commission take additional steps to ensure that claimants 
are put on notice of the potential consequences of falsely representing 
that they have waived an award from the alternative program? If so, 
please explain why this is uniquely important in this context and what 
approach the Commission should take (such as, for example, requiring 
claimants to explicitly acknowledge that providing false information to 
the Commission could constitute a violation of Section 1001 of Title 18 
of the United States Code (and any other applicable provisions))?
    10. Are the time limits imposed by the Comparability Approach and 
Whistleblower's Choice Option appropriate? Should these time periods be 
longer or shorter and, if so, what would be appropriate time periods? 
Please explain.

[[Page 9290]]

B. Proposed Amendment To Exchange Act Rule 21F-6 Regarding Size of 
Award

    Rule 21F-6 identifies the criteria that the Commission may consider 
when determining the amount of an award.\53\ The 2020 Amendments added 
language to Rule 21F-6 clarifying that it was within the Commission's 
discretion to consider the dollar amount of an award when making an 
award determination.\54\ Before this amendment, the rule (with one 
exception, see infra footnote 58 and accompanying text) referred to the 
Commission making award determinations by considering percentage 
adjustments to increase and decrease the award amount, and neither 
unambiguously provided that the Commission could consider dollar 
amounts nor prohibited it from doing so when assessing the various 
award factors.\55\
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    \53\ In deciding whether to increase the amount of an award, 
Rule 21F-6(a) identifies the following relevant considerations: (1) 
``The significance of the information provided by a whistleblower to 
the success of the Commission action or related action''; (2) ``the 
degree of assistance provided by the whistleblower and any legal 
representative of the whistleblower in the Commission action or 
related action''; and (3) the ``programmatic interest in deterring 
violations of the securities laws by making awards to whistleblowers 
who provide information that leads to the successful enforcement'' 
of the securities laws. And in deciding whether to decrease the 
amount of an award, Rule 21F-6(b) permits the Commission to 
consider: (1) The ``culpability or involvement of the whistleblower 
in matters associated'' with the covered action or related action; 
(2) ``whether the whistleblower unreasonably delayed in reporting 
the suspected securities violations''; and (3) ``in cases where the 
whistleblower interacted with his or her entity's internal 
compliance or reporting system, whether the whistleblower undermined 
the integrity of such system.''
    \54\ See Rule 21F-6 (``In exercising its discretion to determine 
the appropriate award, the Commission may consider the following 
factors (and only the following factors) in relation to the facts 
and circumstances of each case in setting the dollar or percentage 
amount of the award.''). The 2020 Amendments explicitly acknowledge 
the Commission's discretion to consider the dollar amount of a 
potential award when applying the award factors specified in 
paragraphs (a) and (b) of Rule 21F-6. See, e.g., Adopting Release, 
85 FR 70909-10 (``The Commission has had and continues to have broad 
discretion in applying the Award Factors and setting the Award 
Amount, including the discretion to consider and apply the Award 
Factors in percentage terms, dollar terms or some combination 
thereof.''); id. at n.102 (``When applying the award factors 
specified in Rule 21F-6 and determining the award dollar and 
percentage amounts set forth in the preliminary determination, the 
award factors may be considered by the SEC staff and the Commission 
in dollar terms, percentage terms or some combination thereof.'').
    \55\ The Commission has previously explained that the statutory 
framework that Section 21F establishes can be read to allow the 
Commission to consider the dollar amount of a potential award. 
Proposing Release, 83 FR 34714 n.105. Indeed, the language in 
Section 21F refers to the ``amount of the award,'' which affords the 
Commission discretion to set the awards based on a consideration of 
the appropriate dollar amount that should be paid (provided that 
this dollar amount is between 10 percent and 30 percent of the 
collected monetary sanctions). Id.
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    The Commission proposes a targeted revision to further clarify how 
it may use its discretion to consider the dollar amount of a potential 
award when applying the award factors specified in paragraphs (a) and 
(b) of Rule 21F-6. Specifically, the Commission is proposing a new 
paragraph (d) for Rule 21F-6 that would do two things. First, it would 
provide that the Commission ``shall not'' use the dollar amount of a 
potential award when applying the factors specified in paragraphs (a) 
and (b), or in any other way, to lower a potential award.\56\ Second, 
new paragraph (d) would provide that the Commission may consider the 
dollar amount of a potential award for the limited purpose of 
increasing the award amount.\57\ Several factors counsel in favor of 
this proposal.
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    \56\ If Rule 21F-3(b)(3) were amended to adopt the Offset 
Approach or Topping-Off Approach discussed above in Part II(A)(3), 
the Commission, when applying either of those approaches, may need 
to consider the dollar amount of awards, and thus the Commission 
anticipates that any amended Rule 21F-3(b)(3) adopting either of 
those approaches might require a corresponding amendment to Rule 
21F-6(d).
    \57\ The Commission is also proposing to modify Rule 21F-10(e) 
and Rule 21F-11(e) to make clear that, in applying the award factors 
specified in Rule 21F-6 and determining the award dollar and 
percentage amounts set forth in the preliminary determination, the 
award factors may be considered by the SEC staff and the Commission 
in dollar terms ``subject to the limitations imposed by Rule 21F-
6(d).'' The Commission is also proposing to revise the text of Rule 
21F-11(a) to improve its readability and clarity (with no 
substantive modification of the provision).
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    First, the SEC's ongoing experience with whistleblower awards has 
demonstrated that the discretionary authority to decrease awards based 
on potential dollar size is unnecessary. In the history of the 
Commission's whistleblower program, to the extent that the Commission 
has considered the dollar amount of an award as part of the award 
analysis under Rule 21F-6, the Commission has generally done so to 
increase the amount of an award in connection with applying the ``law 
enforcement interest'' factor in Rule 21F-6(a)(3).\58\ By contrast, the 
Commission has not considered the dollar amount to lower any awards 
since the rule was amended.\59\
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    \58\ As the Commission explained in the 2020 Adopting Release, 
``the Commission's long-standing interpretation of Rule 21F6(a)(3)--
law enforcement interest--already specifically references the 
Commission's discretion to consider the monetary sanctions and the 
potential Award Amount when assessing that factor[.]'' See 85 FR 
70910. See also 83 FR 34712; 76 FR 34331, 34366. Rule 21F-6(a)(3) 
allows the Commission to consider the degree to which a potential 
award will ``enhance[ ] the Commission's ability to enforce the 
federal securities laws and protect[ ] investors'' and ``encourage[ 
] the submission of high quality information from whistleblowers by 
appropriately rewarding'' them. Rule 21F-6(a)(3)(i)-(ii).
    \59\ And since that time, the Commission has granted some of the 
highest awards in the program's history, including two awards at or 
above $110 million, without any suggestion that the award should be, 
or was being, lowered as a result of its dollar size. See Press 
Release, 2021-177, SEC Surpasses $1 Billion in Awards to 
Whistleblowers with Two Awards Totaling $114 Million (Sept. 15, 
2021), available at https://www.sec.gov/news/press-release/2021-177 
(``[W]histleblower's $110 million award consists of an approximately 
$40 million award in connection with an SEC case and an 
approximately $70 million award arising out of related actions by 
another agency''); Press Release, SEC Issues Record $114 Million 
Whistleblower Award (Oct. 22, 2020), available at https://www.sec.gov/news/press-release/2020-266 (``The $114 million award 
consists of an approximately $52 million award in connection with 
the SEC case and an approximately $62 million award arising out of 
the related actions by another agency.'').
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    Second, it has been the Commission's experience that large awards 
in particular generate public interest and in so doing increases the 
instances of whistleblowers coming forward to report securities-law 
violations.\60\ In this way, large awards directly serve the purpose of 
the whistleblower program (and by extension the interests of the 
investing public) by incentivizing whistleblowers to report violations 
to the Commission.\61\
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    \60\ The Commission's whistleblower program was enacted to 
incentivize individuals to submit tips to the Commission with the 
ultimate goal of more effectively and efficiently detecting, 
preventing, and addressing securities law violations. This goal is 
evident in the title of the statutory provision. See Securities 
Whistleblower Incentives and Protection, 15 U.S.C. 78u-6 (emphasis 
added). Moreover, Section 21F(c)(1)(B)(i)(III) of the Exchange Act 
requires the Commission to take ``the programmatic interest in 
deterring violations of the securities laws by making awards to 
whistleblowers who provide information that leads to the successful 
enforcement of such laws.'' See also Rule 21F-6(a)(3) (restating the 
``programmatic interest'' award factor).
    \61\ See Whistleblower Awards Process and Statistics, available 
at https://www.sec.gov/page/whistleblower-100 million.
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    Third, the Commission is concerned that discretionary authority to 
consider the dollar amount of potential awards clarified in the 2020 
Amendments could create uncertainty about, and thereby decrease 
confidence in, the award process itself. The Commission's internal 
award-review process is thorough and robust. For example, award 
recommendations to the Commission are based on the collective views of 
the members of the Commission's Office of the Whistleblower and Claims 
Review Staff (which has historically been composed of senior career 
staff members in the Division of Enforcement), and those 
recommendations are separately reviewed by Enforcement's Office of 
Chief Counsel and the Commission's

[[Page 9291]]

Office of the General Counsel before they are submitted to the 
Commission. But in order to ensure whistleblowers feel safe providing 
information to the Commission, and because the Commission must comply 
with statutory confidentiality protections to avoid disclosing the 
identity of whistleblowers, it does not discuss the details of how that 
award-review process produces final award determinations in individual 
cases.\62\ Indeed, publicly available award determination orders often 
affirm that the Commission considered the Rule 21F-6 criteria without 
flagging specific factual considerations or award factors on which the 
Commission relied, or revealing the actual percentage awarded (instead, 
the award is generally presented as a dollar figure).\63\
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    \62\ See 21F(h)(2) of the Exchange Act, 15 U.S.C. 78u-6(h)(2) 
(imposing heightened confidentiality requirements in order to 
protect the identity of whistleblowers). Id. The SEC is required to 
keep a whistleblower's identity confidential unless and until it is 
required to be disclosed to a defendant in a public proceeding or 
unless the SEC deems it necessary to share it with certain other 
authorities (in which case those authorities must keep it 
confidential). Id.
    \63\ The Commission's long-standing general practice in public 
whistleblower award orders is to describe awards in actual dollar 
amount, rather than percentages (which are generally redacted). 
Adopting Release, 85 FR 70910. This practice has been followed for 
the common-sense reason that actual dollar figures--not abstract 
percentages--are most likely to advance the whistleblower award 
program's goal of incentivizing potential whistleblowers. Id.
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    Because public information regarding how the Commission applies 
award factors in practice is limited, the Commission perceives a risk 
that merely maintaining the authority to lower awards based on the 
dollar amount of the award may create the misimpression that the 
Commission is regularly exercising such authority--and this could in 
turn potentially deter individuals from reporting misconduct.\64\ The 
proposed amendment should foreclose that risk by expressly stating that 
the Commission may not consider the dollar amount of an award for the 
purpose of potentially lowering the award amount.\65\
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    \64\ In reality, both the size and frequency of awards have 
increased since the 2020 Amendments. See supra note 59 and 
accompanying text (noting that, since the 2020 Amendments, the 
Commission has granted some of the highest awards in the program's 
history, including two awards at or above $110 million, without any 
suggestion that the award should be, or was being, lowered as a 
result of its dollar size). In 2020, the program awarded 
approximately $175 million to 39 individuals--at that time both the 
highest dollar amount and the highest number of individuals awarded 
in a given fiscal year in the program's history--triple the number 
of individuals awarded in 2018, the next-highest fiscal year, when 
the Commission awarded 13 individuals. See SEC 2020 Report on 
Whistleblower Program at 2, available at https://www.sec.gov/files/2020AnnualReport_0.pdf. Likewise, in 2020, the Commission received a 
31 percent increase in tips from 2018, the second-highest tip year. 
Id. This trend continued--and accelerated--through 2021. Indeed, the 
Commission made more whistleblower awards in 2021 than in all prior 
years combined, awarding approximately $564 million to 108 
individuals. See SEC 2021 Report on Whistleblower Program at 1, 10, 
available at https://www.sec.gov/files/owb-2021-annual-report.pdf.
    \65\ The proposed amendment would permit the Commission to 
increase the dollar amount of an award when considering any of the 
positive award factors in Rule 21F-6(a). This authority does not 
impact, and in fact is separate and distinct from, the maximum-award 
presumption that Rule 21F-6(c) establishes. See Adopting Release, 85 
FR 70899 (``[W]ith a focus on increased transparency, efficiency and 
clarity, we are adding a specific provision to Rule 21F-6 that will 
create a presumption that, when (1) the statutory maximum authorized 
Award Amount is $5 million or less and (2) the negative Award 
Factors are not present, the Award Amount will be set at the 
statutory maximum, subject to the Commission's discretion to apply 
certain exclusions.'').
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Request for Comment
    11. Are there additional considerations that the Commission should 
assess in deciding whether to adopt any changes to Rule 21F-6, 
including proposed Rule 21F-6(d)?
    12. Are there other or different revisions to Rule 21F-6 that the 
Commission should consider to clarify that the Commission will not 
lower an award based on the potential dollar amount of the award? For 
example, should the Commission consider removing the reference to 
``dollar . . . amount of the award'' entirely from the introductory 
paragraph of Rule 21F-6? Please explain why this approach or any other 
alternative approach should be adopted and explain how the specific 
approach recommended would work.
    13. Instead of completely eliminating the Commission's ability to 
consider the dollar amount of an award when assessing whether to lower 
a potential award, should the Commission retain this authority for a 
subset of awards (e.g., for related-action awards, given that they are 
an ancillary component of the program, or for awards where the 
whistleblower engaged in culpable conduct or obstructed the 
Commission's process in some fashion)? Please identify the approach 
that you would follow and explain the basis for your recommendation if 
it differs from the approach the Commission has proposed.

C. Proposed Technical Amendments To Rule 21F-4(c) and Rule 21F-8(e) 
66
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    \66\ The Commission is not reopening any aspect of Rule 21F-4(c) 
or Rule 21F-8(c) for public comment on other potential revisions, 
including potential substantive revisions, beyond the technical 
revisions proposed herein.
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    Rule 21F-4(c) was adopted by the Commission in 2011 as part of the 
original set of whistleblower program rules to list the three ways a 
whistleblower's information can have ``led to'' the success of an 
action.\67\ There is a scrivener's error at the end of Rule 21F-4(c)(2) 
that the Commission is proposing to correct to enhance the readability 
and grammatical consistency of Rule 21F-4(c). Specifically, the 
Commission would insert a semicolon and the word ``or'' at the end of 
Rule 21F-4(c)(2) to replace the period that is currently there.
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    \67\ See 76 FR 34365. See also id. at 34357 n.438.
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    Rule 21F-8(e) was adopted by the Commission in the 2020 
whistleblower rule amendments to authorize a permanent bar against any 
individual who submits three or more award applications that are 
frivolous or lack a colorable connection between the tip and the 
action.\68\ In this context, paragraph (e)(3) provides a whistleblower 
with notice and an opportunity to withdraw up to three such award 
applications, which, if withdrawn, would not be considered by the 
Commission in determining whether to exercise its authority to impose 
such a permanent bar.\69\ Moreover, paragraph (e)(4) provides a 
whistleblower with notice and an opportunity to withdraw all such 
frivolous or noncolorable award applications that were filed before the 
effective date of the new permanent bar provisions.\70\
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    \68\ See Adopting Release, 85 FR 70920-22.
    \69\ See id. at 70920.
    \70\ See id. at 70921-22.
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    As adopted in 2020, the second sentence of Rule 21F-8(e)(4)(ii) 
states that the procedures in Rule 21F-8(e)(3) shall apply to any award 
application that is pending as of the effective date of the rule and 
that is determined to be a frivolous or noncolorable application. The 
sentence was in error, as paragraphs (e)(3)(i) through (iii) affords 
claimants notice and an opportunity to withdraw only three 
applications, whereas paragraph (e)(4) by its terms applies ``to all 
award applications pending as of the effective date of paragraph (e) of 
this section'' and affords claimants notice and an opportunity to 
withdraw all such pending award applications.\71\ Given this 
scrivener's error, the Commission is proposing a technical amendment to 
delete the second sentence of Rule 21F-8(e)(4)(ii).
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    \71\ The discussion in the adopting release for the 2020 
Amendments is silent about this sentence, further indicating that it 
was a scrivener's error. See id.

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[[Page 9292]]

III. General Request for Public Comment

    We request and encourage any interested person to submit comments 
on any aspect of the proposed rule amendments, interpretations, or 
other items specified above, including the economic analysis contained 
below (especially if accompanied by supporting data and analysis of the 
issues addressed therein).
    Finally, other than the items specifically identified in this 
release, persons wishing to comment are expressly advised that the 
Commission is not proposing any other changes to the whistleblower 
program rules (i.e., 17 CFR 240.21F-1 through 240.21F-18 (Exchange Act 
Rules 21F-1 through 21F-18)), nor is the Commission otherwise reopening 
any of those rules for comment.\72\
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    \72\ See Proposing Release, 83 FR 34734.
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IV. Economic Analysis

    The Commission is sensitive to the economic consequences of its 
rules, including the benefits, costs, and effects on efficiency, 
competition, and capital formation. Section 23(a)(2) \73\ of the 
Exchange Act requires the Commission, in promulgating rules under the 
Exchange Act, to consider the impact that any rule may have on 
competition and prohibits the Commission from adopting any rule that 
would impose a burden on competition not necessary or appropriate in 
furtherance of the purposes of the Exchange Act. Further, Section 3(f) 
of the Exchange Act \74\ requires the Commission, when engaging in 
rulemaking where it is required to consider or determine whether an 
action is necessary or appropriate in the public interest, to consider, 
in addition to the protection of investors, whether the action will 
promote efficiency, competition, and capital formation.
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    \73\ 15 U.S.C. 78w(a)(2).
    \74\ 15 U.S.C. 78c(f).
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    This economic analysis concerns the proposed amendments to Exchange 
Act Rule 21F-3 and Rule 21F-6. As discussed above, the proposed 
amendments to Rule 21F-3(b)(3) would allow awards for related actions 
if an alternative whistleblower program has an award range or award cap 
that would restrict the maximum potential award from that other program 
to an amount that is meaningfully lower than the maximum potential 
award that the Commission could make. The proposed amendment to Rule 
21F-6 would eliminate the Commission's discretion to consider the 
dollar amounts to reduce an award. Although the impact of the proposed 
amendments is expected to be small, to the extent that there is an 
impact, the amendments could increase the size of some whistleblower 
awards and therefore the incentives for whistleblowers to submit tips.
    The benefits and costs discussed below are difficult to quantify. 
For example, we do not have a way of estimating quantitatively the 
extent to which the proposed rules could affect our enforcement program 
by altering whistleblowing incentives. Similarly, we are unable to 
quantify any costs (or benefit) to the whistleblower program's IPF 
associated with the Comparability Approach or the three other 
approaches discussed above for amending Rule 21F-(b)(3). Therefore, the 
discussion of economic effects of the proposed amendments is 
qualitative in nature.

A. Economic Baseline

    To examine the potential economic effects of the amendments, we 
employ as a baseline the set of rules that implement the SEC's 
whistleblower program as amended in September 2020.\75\ Over the past 
10 years, the whistleblower program has been an important component of 
the Commission's efforts to detect wrongdoing and protect investors in 
the marketplace, particularly where fraud is concealed or difficult to 
find. The program has received a high number of submissions from 
whistleblowers and it has also produced substantial awards.\76\ Both 
the number of submissions and the number and dollar amount of awards 
per year have increased considerably since the program was 
initiated.\77\
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    \75\ Earlier this year, the Commission issued a statement 
identifying procedures that could be used by whistleblower award 
program during an Interim Policy-Review Period. Release No. 34-81207 
(Aug. 5, 2021), available at https://www.sec.gov/rules/policy/2021/34-92565.pdf. These procedures are considered in the economic 
baseline.
    \76\ In fiscal year (FY) 2021, the Commission awarded 
approximately $564 million to 108 individuals--both the largest 
dollar amount and the largest number of individuals awarded in a 
single fiscal year. The program was also very active in FY 2020, 
awarding approximately $175 million to 39 individuals. See supra 
note 59.
    \77\ See SEC 2020 Report on Whistleblower Program, at 9-16; U.S. 
Sec. & Exch. Comm'n, Div. of Enf. 2020 Ann. Rep., pp. 9-16 (November 
2, 2020), available at https://www.sec.gov/files/enforcement-annual-report-2020.pdf.
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    Whistleblower programs, and the SEC's whistleblower program in 
particular, have been studied by economists who report findings 
consistent with award programs being effective at contributing to the 
discovery of violations. For example, a recent publication reports 
that, among other benefits, ``[w]histleblower involvement [in the 
enforcement process] is associated with higher monetary penalties for 
targeted firms and employees.'' \78\ In addition, current working 
papers report that the SEC's whistleblower program deters aggressive 
(i.e., potentially misleading) financial reporting \79\ and insider 
trading.\80\
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    \78\ Andrew C. Call, et al., Whistleblowers and Outcomes of 
Financial Misrepresentation Enforcement Actions, 56 J. Acct. Res. 
123, 126 (2018). See also Philip Berger, et al., Did the Dodd-Frank 
Whistleblower Provision Deter Accounting Fraud? (Jan. 2021) 
(unpublished manuscript) available at https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3059231 (``[F]ind[ing] that exposure to Dodd-
Frank reduces the likelihood of accounting fraud of treatment firms 
by 17% relative to control firms.''); Alexander Dyck, et al., Who 
Blows the Whistle on Corporate Fraud?, 65 J. Fin. 2213, 2215 (2010) 
(``[A] strong monetary incentive to blow the whistle does motivate 
people with information to come forward.'').
    \79\ See Christine Weidman & Chummei Zhu, Do the SEC 
Whistleblower Provisions of Dodd Frank Deter Aggressive Financial 
Reporting (Feb. 24, 2020) (unpublished manuscript), available at 
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3105521. See 
also Jaron H. White, The Deterrent Effect of Employee Whistleblowing 
on Firms' Financial Misreporting and Tax Aggressiveness, 92 Acct. 
Rev., 247-80 (2017).
    \80\ See Jacob Raleigh, The Deterrent Effect of Whistleblowing 
on Insider Trading (Sept. 29, 2021) (unpublished manuscript), 
available at https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3672026.
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B. Proposed Rules

1. Proposed Rule 21F-3(b)(3)
    The proposed rule amendments may affect SEC whistleblower awards in 
cases where there is a potential related action that could be covered 
by another whistleblower program. Turning first to the Comparability 
Approach, it would authorize the Commission to make awards in 
particular situations where, under the Multiple-Recovery Rule, another 
award program would otherwise apply if that program has the more direct 
or relevant relationship to the underlying (non-Commission) related 
action.\81\ The Comparability Approach would do this by authorizing the 
Commission to make an award irrespective of the related action's 
relative relationship to the two award programs if the other award 
program is discretionary, or structured to provide meaningfully smaller 
awards than the maximum potential award that could be granted by the 
SEC's program, or if the maximum total award amount that the Commission 
could pay is less than or equal to $5 million. The Whistleblower's 
Choice Option, by

[[Page 9293]]

contrast, would allow the Commission to make an award irrespective of 
the existence of another program and allow the whistleblower to decide 
whether to accept the Commission's award or the other program's award. 
While the two approaches are structured differently, the end result is 
that both the Comparability Approach and the Whistleblower's Choice 
Option may increase the total dollar award amount for a whistleblower 
compared to the baseline. Thus both options could increase the 
incentives for whistleblowers.\82\
---------------------------------------------------------------------------

    \81\ It would be difficult to predict with any degree of 
certainty how often the Comparability Approach would be relevant, 
particularly as whistleblower programs change, and new whistleblower 
programs are implemented. That said, as discussed above, the 
Commission has seen an increase in the number of award matters that 
would potentially implicate the Comparability Approach.
    \82\ See infra notes 84 and 85.
---------------------------------------------------------------------------

    The Whistleblower's Choice Option might have a slightly different 
incentive effect, since a comparison would be made between realizable 
award amounts rather than analysis of award structures.\83\ To the 
extent that a whistleblower prefers to exercise discretion over the 
selection of awards for the same related action, the whistleblower may 
prefer the Whistleblower's Choice Option because the whistleblower 
would have an opportunity to make a decision in every instance where 
another award program might apply. In contrast, the Comparability 
Approach would not offer the whistleblower the opportunity to exercise 
discretion.
---------------------------------------------------------------------------

    \83\ In theory, the Whistleblower's Choice Option could result 
in a larger award than the Comparability Approach. For example, a 
comparable program, such as the CFTC's program, might potentially 
determine an award amount at 20 percent. If, in that case, the 
Commission would have exercised its discretion to determine an award 
at 30 percent for the related action, the whistleblower would 
receive a larger amount under the Whistleblower's Choice Option than 
under the Comparability Approach.
---------------------------------------------------------------------------

    To the extent that these amendments increase the willingness of 
some individuals to come forward with information about potential 
securities law violations, this could, in turn, increase Commission 
enforcement activity and deter wrongdoing. The effects of the rule 
changes are expected to be small, due to the limited circumstances 
under which they would apply, and because there are many factors, 
including non-pecuniary incentives, that motivate whistleblowers.\84\ 
Although the effects may be small, economic research suggests that 
changes in whistleblowing incentives may have an effect on the 
frequency of whistleblowing activity.\85\
---------------------------------------------------------------------------

    \84\ The complex mix of pecuniary and non-pecuniary elements 
that motivate whistleblowers were described in the economic analysis 
for the 2020 Adopting Release for Rule 21F-3(b)(3), section VI.B.2, 
see Adopting Release, 85 FR 70937.
    \85\ See Andrew C. Call, et al., Rank and File Employees and the 
Discovery of Misreporting: The Role of Stock Options, 62 J. Acct. & 
Econ. 277, 297-99 (2016). See also Jonas Heese & Gerardo Perez-
Cavazos, The Effect of Retaliation Costs on Employee Whistleblowing, 
71 J. Acct. & Econ. 101385 (2021).
---------------------------------------------------------------------------

    Because these amendments may increase the amounts paid to 
whistleblowers under certain circumstances, there may be costs 
associated with the proposed changes. One possibility is that the IPF 
would be depleted.\86\ For example, assume the DOJ collected $1.5 
billion on a related action. If there were a meritorious whistleblower 
involved who was entitled to an award, then even a mid-range 20 percent 
award would require the Commission to pay the whistleblower $300 
million, an amount that could well exhaust the IPF.\87\ An award that 
exhausted the IPF could produce additional effects that would depend on 
the size of the shortfall and the SEC whistleblower awards that would 
otherwise be issued and paid during the shortfall period.\88\
---------------------------------------------------------------------------

    \86\ 17 CFR 240.21F-14(d) (Exchange Act Section 21F-14(d)), 
which describes the procedures applicable to the payment of awards, 
indicates that if there are insufficient amounts available in the 
IPF to pay the entire amount of an award within a reasonable period 
of time, then the balance of the payment shall be paid when amounts 
become available. These procedures specify the relative priority of 
competing claims.
    \87\ See generally Exchange Act Section 21F(g)(3)(A). At the end 
of FY 2021, the IPF's balance was $144,442,134. To date, the largest 
amount the award fund has ever had is approximately $453 million. 
See 2013 Annual Report to Congress on the Dodd-Frank Whistleblower 
Program available at https://www.sec.gov/files/annual-report-2013.pdf.
    \88\ See supra note 3. See also Exchange Act Section 
21F(c)(1)(B)(ii).
---------------------------------------------------------------------------

    In addition, we expect that these proposals would increase the 
administrative costs for the SEC's whistleblower program. For example, 
the Comparability Approach would require the Commission to compare 
whistleblower programs based on the expected award amounts from those 
programs. However, we believe these costs would be small relative to 
the baseline, and, to the extent that the program structures are 
stable, the comparisons may not need to be repeated for each case. In 
contrast, the Whistleblower's Choice Option could be expected to 
increase the administrative costs relative to the baseline more than 
the Comparability Approach because it would require the Commission to 
determine whether an award should be granted in each case where there 
is a related action and a separate whistleblower program.\89\ As 
described above, the increase in administrative costs is expected to be 
greater for the Whistleblower's Choice Option than for the 
Comparability Approach.
---------------------------------------------------------------------------

    \89\ The award presumption established by Rule 21F-6(c) could 
help limit the overall administrative costs, however. See Adopting 
Release, 85 FR 70911 (discussing potential ``gains in efficiency 
from streamlining the award determination process'' when the $5 
million award presumption would apply during the award-calculation 
phase).
---------------------------------------------------------------------------

2. Proposed Rule 21F-6
    The proposed rule change would eliminate the Commission's 
discretionary authority to consider dollar amounts in reducing awards 
while retaining the Commissions' discretionary authority to consider 
dollar amounts to increase awards. The 2020 amendments that include 
express language to authorize the Commission to consider, in its 
discretion, the dollar amount of an award when making an award 
determination may have increased whistleblowers' uncertainty relating 
to the program and thus potentially reduced their willingness to report 
potential misconduct. To the extent that the 2020 amendments have 
created uncertainty that may have diminished a whistleblower's 
willingness to come forward, eliminating this discretionary authority 
would reduce uncertainty and thus potentially encourage more 
whistleblowing. However, we cannot determine with any reasonable degree 
of certainty if the proposed revisions to Rule 21F-6 would affect a 
whistleblower's willingness to report a potential securities law 
violation. To the extent that the Commission would have exercised the 
discretion to lower award amounts, the amendments to Rule 21F-6 would 
increase program costs by any such amounts.\90\
---------------------------------------------------------------------------

    \90\ Similar to the proposed amendments to Rule 21F-3(b)(3), to 
the extent that program costs increase as a result of these proposed 
amendments, there would be an increase in the possibility that the 
IPF would be depleted. As described above, an award that exhausted 
the IPF could produce additional effects that would depend on the 
size of the shortfall and the SEC whistleblower awards that would 
otherwise be issued and paid during the shortfall period. See supra 
notes 86 through 88 and accompanying text.
---------------------------------------------------------------------------

C. Additional Alternatives

    As discussed above, the Offset Approach and the Topping-Off 
Approach are alternatives that may also increase whistleblower award 
incentives. For example, under certain circumstances, the Offset 
Approach may produce award amounts in related actions that are 
comparable, if not identical, to the awards produced under the 
Comparability Approach and the Whistleblower's Choice Approach. In 
contrast, the Topping-Off Approach may

[[Page 9294]]

result in smaller changes in the award amounts.\91\
---------------------------------------------------------------------------

    \91\ As described above, the Topping-Off Approach would not 
allow the Commission to provide an increase to the covered-action in 
those instances where the Commission grants an award at the 30 
percent statutory cap, which occurs in a substantial portion of 
cases.
---------------------------------------------------------------------------

    As also discussed above, both of these approaches would likely 
increase the Commission's award-processing time, because the 
Commission's final award-amount determinations would be dependent on 
the completion resolution of the award process by the entity or 
authority administering the other award program. Additional delays may 
adversely affect whistleblower incentives. As a result, despite the 
generally positive expected impact on award amounts, the net impact on 
whistleblower incentives from the Offset Approach and the Topping-Off 
Approach is ambiguous.

D. Effects of the Proposed Rules on Efficiency, Competition, and 
Capital Formation

    As discussed earlier, the Commission is sensitive to the economic 
consequences of its rules, including the effects on efficiency, 
competition, and capital formation. The Commission believes that the 
proposed amendments would make incremental changes to its whistleblower 
program. Thus, the Commission does not anticipate the effects on 
efficiency, competition, and capital formation to be significant.
    The proposed rules could have a positive indirect impact on 
investment efficiency and capital formation by increasing the 
incentives of potential whistleblowers to provide information on 
possible violations. To the extent that increased whistleblowing 
incentives stemming from the proposed rules result in more timely 
reporting of useful information on possible violations or the reporting 
of higher quality information on possible violations, the Commission's 
enforcement activities could become more effective. More effective 
enforcement could lead to earlier detection of violations and increased 
deterrence of potential future violations, which could improve price 
efficiency and assist in a more efficient allocation of investment 
funds. Securities frauds, for example, can cause inefficiencies in the 
economy by diverting investment funds from legitimate, productive 
uses.\92\
---------------------------------------------------------------------------

    \92\ See Adopting Release, 76 FR 34362.
---------------------------------------------------------------------------

Request for Comment
    The Commission seeks commenters' views and suggestions on all 
aspects of its economic analysis of the proposed amendments. In 
particular, the Commission asks commenters to consider the following 
questions:
    14. Are there costs and benefits associated with the proposed 
amendments that the Commission has not identified? If so, please 
identify them and, if possible, offer ways of estimating these costs 
and benefits.
    15. Are there effects on efficiency, competition, and capital 
formation stemming from the proposed amendments that the Commission has 
not identified? If so, please identify them and explain how the 
identified effects result from one or more amendments.

V. Small Business Regulatory Enforcement Fairness Act

    For purposes of the Small Business Regulatory Enforcement Fairness 
Act of 1996 (``SBREFA''),\93\ the Commission solicits data to determine 
whether the proposed rule amendments constitute a ``major'' rule. Under 
SBREFA, a rule is considered ``major'' where, if adopted, it results or 
is likely to result in:
---------------------------------------------------------------------------

    \93\ Public Law 104-121, tit. II, 110 Stat 857 (1996).
---------------------------------------------------------------------------

     An annual effect on the economy of $100 million or more 
(either in the form of an increase or a decrease);
     A major increase in costs or prices for consumers or 
individual industries; or
     Significant adverse effects on competition, investment, or 
innovation.
    Commenters should provide empirical data on: (a) The potential 
annual effect on the economy; (b) any increase in costs or prices for 
consumers or individual industries; and (c) any potential effect on 
competition, investment or innovation.

VI. Regulatory Flexibility Act Certification

    Section 603(a) of the Regulatory Flexibility Act \94\ requires the 
Commission to undertake an initial regulatory flexibility analysis of 
the proposed rules unless the Commission certifies that the proposed 
rules, if adopted, would not have a significant economic impact on a 
substantial number of small entities.\95\
---------------------------------------------------------------------------

    \94\ 5 U.S.C. 603(a).
    \95\ 5 U.S.C. 605(b).
---------------------------------------------------------------------------

    Small entity is defined in Section 601(6) of Title 5 of the U.S. 
Code to mean ``small business,'' ``small organization,'' and ``small 
governmental jurisdiction'' (see Section 601(3) through (5)). The 
definition of ``small entity'' does not include individuals. The 
proposed rules apply only to an individual, or individuals acting 
jointly, who provide information to the Commission relating to the 
violation of the securities laws. Companies and other entities are not 
eligible to participate in the whistleblower award program as 
whistleblowers. Consequently, the persons that would be subject to the 
proposed rules are not ``small entities'' for purposes of the 
Regulatory Flexibility Act.
    For the reasons stated above, the Commission certifies, pursuant to 
605(b) of Title 5 of the U.S. Code that the proposed rules if adopted 
would not have a significant economic impact on a substantial number of 
small entities.
    Solicitation of Comments: We encourage the submission of comments 
with respect to any aspect of this Regulatory Flexibility Act 
Certification. To the extent that commenters believe that the proposed 
rules if adopted might have a covered impact, we ask they describe the 
nature of any impact and provide empirical data supporting the extent 
of the impact. We will place any such comments in the same public file 
as comments on the proposed amendments themselves.

VII. Statutory Basis

    The Commission proposes the rule amendments contained in this 
document under the authority set forth in Sections 3(b), 21F, and 23(a) 
of the Exchange Act.

List of Subjects in 17 CFR Part 240

    Securities, Whistleblowing.

Text of the Proposed Amendments

    For the reasons set out in the preamble, title 17, chapter II of 
the Code of Federal Regulations is proposed to be amended as follows:

PART 240--GENERAL RULES AND REGULATIONS, SECURITIES EXCHANGE ACT OF 
1934

0
1. The authority citation for part 240 continues to read, in part, as 
follows:

    Authority:  15 U.S.C. 77c, 77d, 77g, 77j, 77s, 77z-2, 77z-3, 
77eee, 77ggg, 77nnn, 77sss, 77ttt, 78c, 78c-3, 78c-5, 78d, 78e, 78f, 
78g, 78i, 78j, 78j-1, 78k, 78k-1, 78l, 78m, 78n, 78n-1, 78o, 78o-4, 
78o-10, 78p, 78q, 78q-1, 78s, 78u-5, 78w, 78x, 78dd, 78ll, 78mm, 
80a-20, 80a-23, 80a-29, 80a-37, 80b-3, 80b-4, 80b-11, and 7201 et 
seq., and 8302; 7 U.S.C. 2(c)(2)(E); 12 U.S.C. 5221(e)(3); 18 U.S.C. 
1350; Pub. L. 111-203, 939A, 124 Stat. 1376 (2010); and Pub. L. 112-
106, sec. 503 and 602, 126 Stat. 326 (2012), unless otherwise noted.
* * * * *
    Section 240.21F is also issued under Pub. L. 111-203, Sec.  
922(a), 124 Stat. 1841 (2010).
* * * * *

[[Page 9295]]

Option 1

0
2. Amend Sec.  240.21F-3 by:
0
a. Revising paragraphs (b)(3) introductory text and (b)(3)(i) and 
(iii); and
0
b. Adding paragraphs (b)(3)(iv), (v), and (vi).
    The revisions and additions read as follows:


Sec.  240.21F-3   Payment of awards.

* * * * *
    (b) * * *
    (3) The following provision shall apply where a claimant's 
application for a potential related action may also involve a potential 
recovery from a comparable whistleblower award program (as defined in 
paragraph (b)(3)(iv) of this section) for that same action.
    (i) Notwithstanding paragraph (b)(1) of this section, if a judicial 
or administrative action is subject to a separate monetary award 
program established by the Federal Government, a state government, or a 
self-regulatory organization (SRO), the Commission will only 
potentially qualify for related-action status if either:
    (A) The Commission finds that the maximum total award that could 
potentially be paid by the Commission would not exceed $5 million; or
    (B) The Commission finds (based on the facts and circumstances of 
the action) that the Commission's whistleblower program has the more 
direct or relevant connection to that action.
* * * * *
    (iii) The conditions in paragraphs (b)(3)(iii)(A) through (C) of 
this section apply to a determination under paragraph (b)(3)(ii) of 
this section.
    (A) The Commission shall not make a related-action award to a 
claimant (or any payment on a related-action award if the Commission 
has already made an award determination) if the claimant receives any 
payment from the other program for that action.
    (B) If a claimant was denied an award by the other award program, 
the claimant will not be permitted to readjudicate any issues before 
the Commission that the governmental/SRO entity responsible for 
administering the other whistleblower award program resolved, pursuant 
to a final order of such government/SRO entity, against the claimant as 
part of the award denial.
    (C) If the Commission makes an award before an award determination 
is finalized by the governmental/SRO entity responsible for 
administering the other award program, the award shall be conditioned 
on the claimant making an irrevocable waiver of any claim to an award 
from the other award program. The claimant's irrevocable waiver must be 
made within 60 calendar days of the claimant receiving notification of 
the Commission's final order.
    (iv) The provisions of paragraphs (b)(3)(iv)(A) through (D) of this 
section apply to program comparability determinations.
    (A) For purposes of paragraph (b)(3) of this section, a comparable 
whistleblower award program is an award program that satisfies the 
following criteria:
    (1) The award program is administered by an authority or entity 
other than the Commission;
    (2) The award program does not have an award range that could 
operate in a particular action to yield an award for a claimant that is 
meaningfully lower (when assessed against the maximum and minimum 
potential awards that program would allow) than the award range that 
the Commission's program could yield (i.e., 10 to 30 percent of 
collected monetary sanctions); and
    (3) The award program does not have a cap that could operate in a 
particular action to yield an award for a claimant that is meaningfully 
lower than the maximum award the Commission could grant for the action 
(i.e., 30 percent of collected monetary sanctions in the related 
action).
    (4) The authority or entity administering the program may not in 
its sole discretion deny an award notwithstanding the fact that a 
whistleblower otherwise satisfies the established eligibility 
requirements and award criteria.
    (B) The Commission shall make a determination on a case-by-case 
basis whether an alternative award program is a comparable award 
program for purposes of the particular action on which the claimant is 
seeking a related-action award with respect to paragraphs 
(b)(3)(iv)(A)(1) through (3) of this section.
    (C) If the Commission determines that an alternative award program 
is not comparable, the Commission shall condition its award on the 
meritorious whistleblower making within 60 calendar days of receiving 
notification of the Commission's final award an irrevocable waiver of 
any claim to an award from the other award program.
    (D) A whistleblower whose related-action award application is 
subject to the provisions of paragraph (b)(3) of this section 
(including a whistleblower whose related-action award application 
implicates another award program that does not qualify as a comparable 
program as a result of paragraph (b)(3)(iv)(A) of this section) has the 
affirmative obligation to demonstrate that the whistleblower has 
complied with the terms and conditions of this section regarding an 
irrevocable waiver. This shall include taking all steps necessary to 
authorize the administrators of the other program to confirm to staff 
in the Office of the Whistleblower (or in writing to the claimant or 
the Commission) that an irrevocable waiver has been made.
    (v) A claimant seeking a related-action award also has an 
affirmative obligation to promptly inform the Office of the 
Whistleblower if the claimant applies for an award on the same action 
from another award program.
    (vi) The Commission may deem a claimant ineligible for a related-
action award if any of the conditions and requirements of paragraph 
(b)(3) of this section in connection with that related action are not 
satisfied.

Option 2

0
3. Amend Sec.  240.21F-3 by revising paragraph (b)(3) to read as 
follows:


Sec.  240.21F-3   Payment of awards.

* * * * *
    (b) * * *
    (3) The following terms and conditions apply whenever an award 
claimant's application for an award in connection with a related action 
may also involve a potential recovery from another whistleblower award 
program for that same action.
    (i) If the Commission determines that the claimant qualifies for an 
award for the related action, any payment of that award shall be 
conditioned on the claimant making an irrevocable waiver of any award 
or potential award from the other award program. In determining whether 
a claimant qualifies for an award on a related action (and in setting 
the amount of any award), the Commission shall process the application 
without regard to the existence of the alternative award program or any 
award determination that the alternative program reaches.
    (ii) The Commission shall not make a related-action award to a 
claimant (or any payment on an award if the Commission has already made 
an award determination) if the claimant has received at any point prior 
to the Commission making any payment on a related-action award any 
payment from the other program for that action.
    (iii) To receive payment from the Commission for a related-action 
award, a claimant must make an irrevocable waiver of any award from the 
other program within 60 calendar days of receiving a final notification 
from both

[[Page 9296]]

award programs regarding the award amounts.
    (iv) A claimant subject to paragraph (b)(3) of this section has the 
affirmative obligation to demonstrate to the satisfaction of the 
Commission that the claimant has complied with the terms and conditions 
of this section regarding an irrevocable waiver. This may include 
taking all steps necessary to authorize the administrators of the other 
program to confirm to staff in the Office of the Whistleblower (or in 
writing to the claimant or the Commission) that an irrevocable waiver 
has been made.
    (v) A claimant seeking a related-action award has an affirmative 
obligation to promptly notify the Office of the Whistleblower in 
writing if the claimant applies for an award on the same action from 
another award program.
    (vi) The Commission may deem a claimant ineligible for a related-
action award if any of the conditions and requirements of paragraph 
(b)(3) of this section in connection with that related action are not 
satisfied.
0
4. Amend Sec.  240.21F-4 by revising paragraph (c)(2) to read as 
follows:


Sec.  240.21F-4   Other definitions.

* * * * *
    (c) * * *
    (2) You gave the Commission original information about conduct that 
was already under examination or investigation by the Commission, the 
Congress, any other authority of the Federal Government, a state 
attorney general or securities regulatory authority, any self-
regulatory organization, or the PCAOB (except in cases where you were 
an original source of this information as defined in paragraph (b)(5) 
of this section), and your submission significantly contributed to the 
success of the action; or
* * * * *
0
5. Amend Sec.  240.21F-6 by adding paragraph (d) to read as follows:


Sec.  240.21F-6   Criteria for determining amount of award.

* * * * *
    (d) Consideration of the dollar amount of an award. When applying 
the award factors specified in paragraphs (a) and (b) of this section, 
the Commission may consider the dollar amount of a potential award for 
the limited purpose of increasing the award amount. The Commission 
shall not, however, use the dollar amount of a potential award as a 
basis to lower a potential award, including but not limited to in 
applying the factors specified in paragraphs (a) and (b) of this 
section.
0
6. Amend Sec.  240.21F-8 by revising paragraph (e)(4)(ii) to read as 
follows:


Sec.  240.21F-8   Eligibility and forms.

* * * * *
    (e) * * *
    (4) * * *
    (ii) If, within 30 calendar days of the Office of the Whistleblower 
providing the foregoing notification, you withdraw the relevant award 
application(s), the withdrawn award application(s) will not be 
considered by the Commission in determining whether to exercise its 
authority under paragraph (e) of this section.
0
7. Amend Sec.  240.21F-10 by revising paragraph (e) to read as follows:


Sec.  240.21F-10   Procedures for making a claim for a whistleblower 
award in SEC actions that result in monetary sanctions in excess of 
$1,000,000.

* * * * *
    (e) You may contest the Preliminary Determination made by the 
Claims Review Staff by submitting a written response to the Office of 
the Whistleblower setting forth the grounds for your objection to 
either the denial of an award or the proposed amount of an award. The 
response must be in the form and manner that the Office of the 
Whistleblower shall require. You may also include documentation or 
other evidentiary support for the grounds advanced in your response. In 
applying the award factors specified in Sec.  240.21F-6, and 
determining the award dollar and percentage amounts set forth in the 
Preliminary Determination, the award factors may be considered by the 
SEC staff and the Commission in dollar terms, percentage terms or some 
combination thereof, subject to the limitations imposed by Sec.  
240.21F-6(d). Should you choose to contest a Preliminary Determination, 
you may set forth the reasons for your objection to the proposed amount 
of an award, including the grounds therefore, in dollar terms, 
percentage terms or some combination thereof.
    (1) Before determining whether to contest a Preliminary 
Determination, you may:
    (i) Within 30 calendar days of the date of the Preliminary 
Determination, request that the Office of the Whistleblower make 
available for your review the materials from among those set forth in 
Sec.  240.21F-12(a) that formed the basis of the Claims Review Staff's 
Preliminary Determination.
    (ii) Within 30 calendar days of the date of the Preliminary 
Determination, request a meeting with the Office of the Whistleblower; 
however, such meetings are not required, and the office may in its sole 
discretion decline the request.
    (2) If you decide to contest the Preliminary Determination, you 
must submit your written response and supporting materials within 60 
calendar days of the date of the Preliminary Determination, or if a 
request to review materials is made pursuant to paragraph (e)(1) of 
this section, then within 60 calendar days of the Office of the 
Whistleblower making those materials available for your review.
* * * * *
0
8. Amend Sec.  240.21F-11 by revising paragraphs (a), (c), and (e) to 
read as follows:


Sec.  240.21F-11   Procedures for determining awards based upon a 
related action.

    (a) If you are eligible to receive an award following a Commission 
action that results in monetary sanctions totaling more than 
$1,000,000, you also may be eligible to receive an award in connection 
with a related action (as defined in Sec.  240.21F-3).
* * * * *
    (c) The Office of the Whistleblower may request additional 
information from you in connection with your claim for an award in a 
related action to demonstrate that you directly (or through the 
Commission) voluntarily provided the governmental/SRO entity (as 
specified in Sec.  240.21F-3(b)(1)) the same original information that 
led to the Commission's successful covered action, and that this 
information led to the successful enforcement of the related action. 
Further, the Office of the Whistleblower, in its discretion, may seek 
assistance and confirmation from the governmental/SRO entity in making 
an award determination. Additionally, if your related-action award 
application might implicate a second whistleblower program, the Office 
of the Whistleblower is authorized to request information from you or 
to contact any authority or entity responsible for administering that 
other program, including disclosing the whistleblower's identity if 
necessary, to ensure compliance with the terms of Sec.  240.21F-
3(b)(3).
* * * * *
    (e) You may contest the Preliminary Determination made by the 
Claims Review Staff by submitting a written response to the Office of 
the Whistleblower setting forth the grounds for your objection to 
either the denial of an award or the proposed amount of an award. The 
response must be in the form and manner that the Office of the 
Whistleblower shall require. You may also include documentation or 
other evidentiary support for the grounds advanced in your response. In 
applying

[[Page 9297]]

the award factors specified in Sec.  240.21F-6, and determining the 
award dollar and percentage amounts set forth in the Preliminary 
Determination, the award factors may be considered by the SEC staff and 
the Commission in dollar terms, percentage terms or some combination 
thereof, subject to the limitations imposed by Sec.  240.21F-6(d). 
Should you choose to contest a Preliminary Determination, you may set 
forth the reasons for your objection to the proposed amount of an 
award, including the grounds therefore, in dollar terms, percentage 
terms or some combination thereof.
    (1) Before determining whether to contest a Preliminary 
Determination, you may:
    (i) Within 30 calendar days of the date of the Preliminary 
Determination, request that the Office of the Whistleblower make 
available for your review the materials from among those set forth in 
Sec.  240.21F-12(a) that formed the basis of the Claims Review Staff's 
Preliminary Determination.
    (ii) Within 30 calendar days of the date of the Preliminary 
Determination, request a meeting with the Office of the Whistleblower; 
however, such meetings are not required, and the office may in its sole 
discretion decline the request.
    (2) If you decide to contest the Preliminary Determination, you 
must submit your written response and supporting materials within 60 
calendar days of the date of the Preliminary Determination, or if a 
request to review materials is made pursuant to paragraph (e)(1) of 
this section, then within 60 calendar days of the Office of the 
Whistleblower making those materials available for your review.
* * * * *

    By the Commission.

    Dated: February 10, 2022.
Vanessa A. Countryman,
Secretary.
[FR Doc. 2022-03223 Filed 2-17-22; 8:45 am]
BILLING CODE 8011-01-P